Gujarat High Court Case Information System Print SCA/16854/2011 9/ 9 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 16854 of 2011 [ENTITY]. - Petitioner(s) Versus [ENTITY] - Respondent(s) Appearance : MR [ENTITY] for MR [ENTITY] for Petitioner MRS [ENTITY] for Respondent CORAM : HONOURABLE MR.JUSTICE [ENTITY] and HONOURABLE Ms. JUSTICE [ENTITY] 19th December 2011 ORAL ORDER (Per
: HONOURABLE Ms. JUSTICE [ENTITY]) The petitioner-a partnership firm has challenged, by way of present writ petition, the notice of re-opening issued by the respondent on 28th March 2011. It is averred by the petitioner that the petitioner-firm, for the Assessment Year 2004-05, filed its return of income on 1st November 2004 alongwith statement of taxable income; copies of audited Profit & Loss Account; Balance Sheet, Capital Account, etc. A notice under [SECTION] of the [ACT]" for short] was issued by the Assessing Officer on 20th July 2005 calling for various details, which were furnished and requisite explanations also were submitted by the Chartered Accountant.
After due scrutiny, assessment was finalized under [SECTION] of the Act on 29th December 2006. It is the say of the petitioner that there were various disallowances made, while finalizing the return, out of the total claim of expenses made by the petitioner-firm.
Pursuant to the notice of re-opening dated 28th March 2011, requests to furnish was made. It emerges from the record that the reasons given indicate that for the Assessment Year concerned, assessee had claimed huge expenses towards labour expenses and carting expenses on the basis of self-prepared vouchers, which do not contain the work carried out by the labourers nor are they reflective of the work-site on which such was carried out. It further mentions that such payments required verification and they were not verifiable in absence of specific details regarding the addresses and the PAN of the payees. The Assessing Officer, therefore, stated that he had a reason to believe that the correct income of the assessee chargeable to tax has escaped assessment, within the meaning of [SECTION] of the Act resulting into issuance of impugned notice.
It would be pertinent to note that after the notice of re-opening, [CASE NUMBER] had been preferred by the very petitioner without raising objections to such proposal for re-opening, and therefore, it was directed by this Court vide its order dated 21st September 2001 that the petitioner should first approach the Assessing Officer raising the objections to the notice of re-opening, and after those objections would be disposed of, following the decision of the Apex Court in case of [PRECEDENT], it would be open for the petitioner to pursue the remedy; if the result is adverse.
Consequently, objections to the said re-opening were filed by the petitioner on 21st September 2011 submitting as under :-
"3. We submit that having gone through the reasons recorded for re-opening the above assessment, we find that the action taken u/[SECTION] of the Act to reopen the assessment for A.Y 2004-05 is bad in law and therefore we hereby raise objections against the initiation of the action as under :
(a) The action u/[SECTION] is initiated on account of change of opinion for review of the original assessment which is completed after scrutiny u/[SECTION] of the Act. This would be seen fro the fact that the issues of labour expenses and carting expenses shown to be providing the basis for initiating action of re-opening the above assessment have been duly considered in paragraph 4 and 4.1 of the original assessment made under [SECTION] of the Act by order dated 29.12.2006, and after due consideration of the material the Assessing Officer has made disallowances out of claim of such expenses. Therefore, attempt to revisit the same issues amounts to review of the original assessment which is not permissible under the relevant provisions. We, therefore, object to the proposed action u/[SECTION] of the Act."
There is yet another communication that has been received by the assessee on 27th September 2011 stating that the time limit given under [SECTION] of the Act is six years from the end of relevant assessment year and since the limitation is to expire on 31/03/2011, the impugned notice issued on 28th March 2011 is not a time barred action, and therefore, allegations made are baseless.
After dealing with the objections raised by the petitioner, the communication made by the respondent is dated 5th October 2011, rejecting these objections in the following terms :-
"Please refer to your reply dated 30.09.2011.
2. In this connection, I have gone through your both the objections raised in paragraph 3 (a) and (b).
3. The fact and circumstances of your case is totally different from the case laws mentioned by you ie., (i) [PRECEDENT]; (ii) [PRECEDENT].
4. Therefore, you are again requested to file your return of income for AY 2004-05 as per notice u/[SECTION] dated 28.03.2011.
5. Kindly note that, fails to comply with the notice penalty u/[SECTION] may be imposed without giving any further opportunity.
Your case is fixed on 11/10/2011 at 01.30 pm with request to submit necessary return."
On receiving adverse order, present petition is filed, inter alia, requesting to quash the proceedings initiated under [SECTION] as also for quashing the notice issued under [SECTION] of the Act.
On 14th November 2011, this Court had issued the notice after noting contentions of the learned counsel for the petitioner that the assessment previously framed after scrutiny is sought to be reopened beyond 4 years from the end of the relevant assessment year without any allegation that income chargeable to tax has escaped assessment on account of failure on the part of the assessee to fully and truly disclose all facts material for the assessment and that the issues on which the assessment is sought to be reopened were previously examined and concluded by the Assessing Officer.
Replying to the same, affidavit-in-reply has been filed by the respondent, inter alia, urging that objections raised vide communication dated 21st September 2011; pursuant to the Court's direction, have been appropriately dealt with. It is further submitted that the assessee, during the year under consideration had claimed huge expenses on the basis of self prepared vouchers which did not contain any details with regard to the nature of work and the sites on which the work was carried out. Thus, there is failure on the part of the assessee to make full and true disclosure with supporting evidence to prove the claim, and therefore, the notice under [SECTION] of the Act was justifiably issued.
On having heard learned counsel Mr. [ENTITY] for the petitioner and Ms. [ENTITY], appearing for the Revenue and on having thoroughly considered the material placed before this Court, this petition is being allowed for the reasons to be followed hereinafter.
Undisputedly, this notice of reopening is issued beyond four years from the end of the relevant assessment year which is 2004095, there are well laid down parameters to be regarded and the foremost consideration is as to whether there is allegation with regard to the income in the concerned assessment year having escaped assessment for not having truly and fully disclosed all facts vital and material for the purpose of assessment.
To confer jurisdiction on the Assessing Officer for reopening the assessment u/[SECTION] of the [ACT], beyond four years from the end of relevant Assessment Year, two conditions are required to be satisfied; viz., (i) that the Assessing Officer must have reason to believe that the income chargeable to tax has escaped assessment; and (ii) this occasioned on account of either failure on the part of the assessee to file return of income for that assessment year as to disclose fully and truly all material facts necessary for assessment of that year. Before the Assessing Officer assumes jurisdiction, both these conditions are a must to be satisfied.
It can be noted at the outset only that there is no such allegation in the impugned notice of reopening, yet for further detailed scrutiny, relevant facts need to be examined.
As can be noted from the material placed on record, the petitioner-firm filed the return for the AY 2004-05 in the year 2006. The Assessing Officer had initiated at the relevant time the assessment proceedings in respect of such return and the notice u/[SECTION] of the Act had also been issued. As can be also seen from the record, various materials and necessary documents were furnished pursuant to such notice by the petitioner-firm which culminated into scrutiny assessment under [SECTION] of the Act. Such assessment order dated 29th December 2006 unequivocally reflects that the issue of the labour expenses was previously examined and scrutinized by the Assessing Officer. It clearly emerges from this order that total labour expenses of Rs.2,08,00,908/= was claimed out of which the assessee had furnished the detailed accounts in respect of expenses of Rs. 61,93,660/=. It also provided details of the persons from whom TDS has been deducted. Petty labour expenses paid to various labourers was to the tune of Rs. 1,46,07,248/= where TDS on such payments was not deducted on account of the fact that the payment made in each case was less than Rs. 20,000/=. It is also noted in the assessment order that vouchers were self-prepared. It did not contain the work carried out by the labour and the sites on which the work was carried out is not reflected, therefore, the same were also not verifiable in absence of the details regarding addresses and PAN, etc. After considering entire gamut of these facts, the Assessing Officer came to the conclusion that there is no proper check over the said expenses and on due recourse to these facts and also taking note of total receipts shown by the assessee, one-tenth of the miscellaneous labour expenses was disallowed and added to the total income of the assessee.
It can also also further noted that likewise the Assessing Officer had duly recorded the debit made on account of Carting Expenses to the tune of Rs. 14,56,166/=. There also, he concluded that the vouchers were self-prepared vouchers which did not contain the site on which the work was carried out. Again, in absence of any specific details viz., addresses and PAN, the Assessing Officer opined that in absence of any better check over the said expenses, one-tenth of the total carting expenses needed disallowance and thereby added the same to the income of the assessee. Computation of the income also clearly depicts these aspects, and thus, unfailingly note needs to be taken that the Assessing Officer has already gone into the issues and scrutinized these very issues and concluded while finalizing the relevant assessment.
As mentioned hereinabove, the impugned notice nowhere states that there was any failure on the part of the assessee to disclose fully and truly all the material facts necessary for computation of the income. The re-opening is beyond four years to reiterate and the principles in such cases since are very well laid down, and moreover, once the scrutiny assessment also has been made under [SECTION] of the Act. Beyond the period of four years when the Assessing Officer seeks to re-open where there being nothing to point out that the assessee has failed to fully disclose the true and correct facts, the proceedings initiated on 28th March 2011 are required to be quashed.
It requires to be specifically mentioned here that as mentioned in the reasons for re-opening for verifying the details which were already with the Assessing Officer earlier, such notice cannot be permitted. Not only the issue of Labour expenses and Carting expenses; as mentioned hereinabove, have been elaborately scrutinized and dealt with by the Assessing Officer threadbare, in absence of any specific allegation of non-disclosure of true and full material, re-opening of the assessment simply cannot be made permissible only for the purpose of verifying the details which were otherwise examined elaborately by the Assessing Officer.
In such circumstances, the impugned notice dated 28th March 2011 is quashed and all consequential orders also are set-aside. Petition stands allowed in terms thereof with no order as to costs.
{[ENTITY], J.} {Ms. [ENTITY], J.} Prakash*