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Gujarat High Court

Vinodbhai Jivrajbhai Rabdiya vs The Income Tax Officer Ward-2 on 5 December, 2019

Author: Harsha Devani

Bench: Harsha Devani, Sangeeta K. Vishen

        C/SCA/21624/2019                                           ORDER




           IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

            R/SPECIAL CIVIL APPLICATION NO. 21624 of 2019
                                With
            R/SPECIAL CIVIL APPLICATION NO. 21627 of 2019
                                With
            R/SPECIAL CIVIL APPLICATION NO. 21630 of 2019
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                    VINODBHAI JIVRAJBHAI RABDIYA
                                Versus
                   THE INCOME TAX OFFICER WARD-2
==========================================================
Appearance:
MR MANISH J SHAH(1320) for the Petitioner(s) No. 1
for the Respondent(s) No. 1
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 CORAM: HONOURABLE MS.JUSTICE HARSHA DEVANI
        and
        HONOURABLE MS. JUSTICE SANGEETA K. VISHEN

                               Date : 05/12/2019

                          ORAL ORDER

(PER : HONOURABLE MS.JUSTICE HARSHA DEVANI)

1. By these petitions, the petitioners have challenged the notices issued under section 148 of the Income Tax Act, 1961 (hereinafter referred to as "the Act"), the order rejecting the objections filed by the petitioners against the reasons recorded as well as the assessment orders passed under sub­section (3) of section 143 read with section 147 of the Act and the notices of demand issued under section 156 of the Act.

2. Mr. Manish Shah, learned advocate for the petitioners, invited the attention of the court Page 1 of 5 Downloaded on : Fri Dec 06 02:33:41 IST 2019 C/SCA/21624/2019 ORDER to the reasons recorded to point out that though the assessment has already been made in the hands of the association of persons, the Assessing Officer sought to reopen the assessment to make protective addition in the hands of the petitioners. It was submitted that in the objections against the reasons recorded, the petitioners had contended that the Assessing Officer could not have formed the belief that income chargeable to tax has escaped assessment inasmuch as notice cannot be issued on hypothesis or contingency which may emerge in future.

3. It was pointed out that in support of such submission, reliance had been placed upon the decision of the Bombay High Court in the case of DHFL Venture Capital Fund v. Income Tax Officer and others, [2013] 358 ITR 471 (Bom), wherein the court has held that the formation of the reason to believe and the existence of that reason must be in the present. Recourse can be taken to the provisions of section 148 of the Act where the Assessing Officer has a reason in present, meaning thereby, a reason which is present to his mind when he forms his reason to believe that income has escaped assessment. Recourse to section 148 of the Act cannot be founded in law on a hypothesis of what would be the position in future should an appeal before the appellate Page 2 of 5 Downloaded on : Fri Dec 06 02:33:41 IST 2019 C/SCA/21624/2019 ORDER authority result in a particular outcome. The statute does not contemplate the reopening of an assessment under section 148 of the Act on such a hypothesis or a contingency which may emerge in the future.

4. It was submitted that in the order rejecting the objections made by the petitioners, the Assessing Officer has not dealt with the above submission of the petitioners, which is in breach of the principles of natural justice. Reliance was placed upon an unreported decision of this court in the case of Messrs Vadilal Gases Ltd. v. Union of India and others rendered on 24.09.2015 in Special Civil Application No.10713 of 2015, wherein the court has placed reliance upon the decision of the Supreme Court in the case of Kranti Associates Private Ltd. v. Masood Ahmed Khan, [2010] 9 SCC 493, for the proposition that reasons have virtually become as indispensable a component of a decision making process as observing principles of natural justice by judicial, quasi­judicial and even by administrative bodies. Thus, reasons have been equated with the observance of principles of natural justice. Reliance was placed upon the decision of the Supreme Court in the case of Whirlpool Corporation v. Registrar of Trade Marks, Mumbai, AIR 1999 SC 22, wherein the court Page 3 of 5 Downloaded on : Fri Dec 06 02:33:41 IST 2019 C/SCA/21624/2019 ORDER has held that the alternative remedy has been consistently held by the Supreme Court not to operate as a bar in at least three contingencies, viz. where the writ petition has been filed for the enforcement of any of the fundamental right or where there has been a violation of the principles of natural justice or where the order of proceedings are wholly without jurisdiction or the vires of an Act is challenged.

5. It was submitted that the present case satisfies two of the contingencies laid down in the above decision, namely, that the impugned orders are passed in violation of the principles of natural justice and that the proceedings under section 148 of the Act were wholly without jurisdiction. It was submitted that therefore, these petitions under Article 226 of the Constitution of India against the assessment orders are maintainable.

6. Having regard to the submissions advanced by the learned advocate for the petitioners, issue Notice, returnable on 13.01.2020.

By way of ad­interim relief, the operation of the assessment orders passed under section 143(3) read with section 147 as well as the impugned notices of demand issued under section 156 of the Act is hereby stayed.

Direct service is permitted today.

(HARSHA DEVANI, J) (SANGEETA K. VISHEN,J) PRAVIN KARUNAN Page 5 of 5 Downloaded on : Fri Dec 06 02:33:41 IST 2019