C.W.P. No. 17415 of 2005 [ 1] IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH C.W.P. No. 17415 of 2005 Date of decision: 19.8.2008 Arvinder Singh Grewal and others. .. Petitioners v. Union of India and others. .. Respondents CORAM: HON'BLE MR. JUSTICE HEMANT GUPTA HON'BLE MR. JUSTICE RAJESH BINDAL Present: Mr. S.K. Mukhi, Advocate for the petitioners. Mr. Rajesh Sethi, Advocate for the respondents. .. Rajesh Bindal J. The challenge in the present petition is to the initiation of proceedings for re-assessment by issuing notice under Section 147/148 of the Income-tax Act, 1961 (for short, `the Act') against the petitioners for the assessment years 1998-99 to 2004-05. The facts as pleaded in the petition are that the petitioners are agriculturists having ancestral land belonging to HUF in the name and style of M/s Nasib Singh and Sons (HUF). The land was allotted to the forefathers of the petitioners in lieu of land left by them in Pakistan. During the course of assessment for the year 1977-78 under the Wealth Tax Act, 1954, Nasib Singh established the status of HUF regarding the property and the assessment was framed accordingly. Subsequently the status of HUF was also accepted by the department in the assessments framed for the years 1975-76 to 1980-81. The agricultural land so owned by Nasib Singh was acquired by Improvement Trust, Ludhiana and the amount of compensation so received by the HUF was not subjected to income tax as no capital gain arises on the sale of agricultural land. The amount of compensation so received by the HUF was parked with various banks in interest bearing deposits in the name of HUF and the members and co-parceners thereof. For the interest so earned, the members and co-parceners declared the same as non-taxable by filing statutory Form 15H with the banks. The income so earned was declared in the hands of HUF. In spite of the fact that there was no concealment as such, the department issued notices dated 4.3.2005 and 7.3.2005 (Annexure P.1) to the petitioners under Section 147/148 of the Act for initiating C.W.P. No. 17415 of 2005 [ 2] re-assessment proceedings. The petitioners filed objections to the issuance of notice. The submission was that once the status of HUF was already accepted and the income was declared in the hands of HUF, there was no question of assessing the same in the hands of individuals as deposits in the banks were made in the names of HUF and co-parceners of the HUF and not in the individual capacity of the co-parceners. However, vide communication dated 8.9.2005, Income Tax Officer rejected the objections raised by the petitioners by noticing that there was nothing on record to show that the FDRs belonged to the HUF or the fact that the money belonged to the HUF was in the knowledge of the Assessing Officer. Learned counsel for the petitioners submitted that initiation of proceedings for re-assessment against the petitioners, in the facts and circumstances of the present case, is totally without jurisdiction and is sheer harassment to the petitioners. The FDRs in fact, belonged to the HUF. The money was deposited in the name of the petitioners being the members of HUF and once it was so declared, there was no question of issuing notice to the petitioners for re- assessment by considering the earning of interest on the FDRs in the banks as income of the petitioners in their individual capacity. He further submitted that there was no concealment as such by the petitioners, as true facts and disclosure were already made to the department at the relevant time. The reasons recorded for initiating the re-assessment proceedings had no nexus with the object sought to be achieved. In fact, the department wanted to hold a roving enquiry merely on suspicion which is not permissible. On the other hand, learned counsel for the Revenue submitted that it is a case where the petitioners are guilty of concealment of material facts from the department. The interest so earned on the FDRs in the banks was never disclosed to the department. In Form 15H submitted by the petitioners, the status of the depositor was shown as individual and not as member or co-parcener of HUF. In fact, it is only after the factum of concealment of income as interest on the FDR came to the notice of the department and notices for re-assessment were issued on 4.3.2005 and 7.3.2005. Revised returns for the assessment years 1999-2000 to 2005-06 were filed declaring the interest income therein. Otherwise, even in the HUF, the interest so earned on various FDRs in the banks in the names of the petitioners was no where declared. The material on the basis of which the reasons were recorded for re-opening the case for re-assessment is sufficient. It is not a case of roving enquiry initiated merely on the basis of suspicion. C.W.P. No. 17415 of 2005 [ 3] We have heard learned counsel for the parties and perused the paper book. The basic issue raised by learned counsel for the petitioners in the present case is that the petitioners cannot be assessed/re-assessed on account of interest income earned from the banks on the deposits made out of the funds of HUF and specially when such an income had already been declared in the hands of HUF. However, on a reference to the pleading of the respondents in the written statement, which is corroborated in the form of documents placed on record by the petitioners themselves, it was only after the notice for re-assessment had been issued to the petitioners that revised returns were filed by the HUF declaring the interest income to be part of the income of HUF, meaning thereby that initially such income was neither declared in the hands of HUF nor in the hands of the petitioners. Learned counsel for the petitioners has not been able to establish beyond doubt on the basis of any material on record that the income from interest, which is sought to be re-assessed had already been declared in any return filed prior to the issuance of notice after re-assessment. Keeping these facts in view, we do not find that any interference in the notice issued to the petitioners for re- assessment is called for at this stage. We are refraining from further dilating on the merits of the issues raised in the present petition as the same may affect the case of either of the parties during the course of assessment proceedings. The assessment of the petitioners shall be framed by the Assessing Officer strictly in terms of the material which comes on record during the assessment proceedings and nothing said above shall be considered as an expression of opinion on the merits of the controversy. For the reasons mentioned above, the writ petition is dismissed with no order as to costs. (Rajesh Bindal) Judge (Hemant Gupta) Judge 19.8.2008 mk