Ganesh Valabhai Family Trust vs Deputy Commissioner of Income Tax

D.A. Mehta, J.—This petition challenges notice dt. 31st March, 1994 (Annex. ''A'') issued u/s 148 of the IT Act, 1961 (the ''Act'').

The petitioner is an AOP, carrying on business as builder and developer. For asst. yr. 1983-84 return of income came to be filed originally on 18th July, 1984 showing total income at nil. This was revised on 18th Feb., 1986 declaring total income at nil. The assessment order came to be framed on 31st March, 1986 u/s 143(3) of the Act on a total income of Rs. 1,37,930.

As the notice issued u/s 148 of the Act is beyond the period of four years from the end of the assessment year upon notice being issued, the respondent has placed on record copy of reasons recorded on 31st March, 1994 which reads as under:

As per tax deduction certificate filed, the total amount paid to assessee for work done is stated of Rs. 20,57,903 instead the work done is shown in the return of income amounting to Rs. 1,98,800 by the assessee.

Sd/- Illegible.

Ganesh Valabhai Family Trust asst. yr. 1983-84.

The assessee has wrongly shown the contract receipt at Rs. 1,98,800 while as per the TDS certificate, the work done is shown at Rs. 20,51,903.

Thus the assessee has not furnished fully and truly all particulars necessary for computation of its income and furnished inaccurate particulars of its income.

I have, therefore, reason to believe that the income chargeable to tax has escaped assessment for asst. yr. 1983-84.

Sd/-Illegible.

Mr. S.N. Soparkar, learned senior advocate appearing on behalf of the petitioner contended that the impugned notice was bad in law as there was no omission or failure on part of the assessee to fully and truly disclose all material particulars necessary for the purpose of assessment. That in fact the P&L a/c, the balance sheet and the ledger account of the society i.e. Mayur Mala Co-operative Housing Society Ltd. clearly reflect that the receipt towards the work done during the accounting period relevant to the assessment year in question was only Rs. 1,98,800, while the amount of Rs. 20,66,303 was advance received from the said society. That in fact the original assessment order framed u/s 143(3) of the Act has specifically considered this aspect of the matter as could be seen from para No. 7 of the said assessment order, and therefore, the reasons for reopening are not germane and did not reflect that there is any omission or failure on part of the petitioner-assessee. In support of the submissions made reliance has been placed on the following decisions:

(1) Calcutta Discount Company Limited Vs. Income Tax Officer, Companies District, I and Another,

(2) Income tax Officer, Calcutta and Others Vs. Lakhmani Mewal Das,

(3) Parashuram Pottery Works Co. Ltd. Vs. Income Tax Officer, Circle I, Ward A, Rajkot,

(4) Krishna Metal Industries Vs. H.M. Algotar,

On behalf of the respondent-Revenue learned senior standing counsel Shri M.R. Bhatt submitted that the reopening was based on certificate issued for TDS in Form No. 26C as required by provisions of Section 194C of the Act. That the copy of the said certificate dt. 29th Nov., 1982 specifically reflected in column No. 4 that an amount of Rs. 20,51,903 was credited or paid in pursuance of the contract and therefore once the payment was pursuant to the contract the assessee was duty bound to disclose the same as income. The assessee having failed to do so the reopening was justified in light of the provisions of Section 147 of the Act. That the assessee had failed to furnish fully and truly all particulars necessary for computation of its income. He has also invited attention to communication dt. 8th Jan., 1991 to point out that the respondent authority had recorded in para No. 2 of the said communication that the certificate for deduction of tax at source had been filed along with return of income for asst. yr. 1984-85 i.e. the subsequent year, and hence the AO was justified in having a reason to believe that income had escaped assessment.

Having heard the learned advocates appearing for the respective parties, it is apparent that the impugned notice seeking to reopen completed assessment for asst. yr. 1983-84 u/s 143(3) of the Act cannot be permitted to operate. The position is well settled that in the event an assessment is sought to be reopened beyond a period of four years from the end of the assessment year in question Revenue has to prima facie establish that income has escaped assessment, and such escapement of income is as a result of omission or failure on part of the assessee to fully and truly disclose all material particulars necessary for assessing such income. If the reasons recorded are examined it becomes clear that the basis is the certificate of TDS. As already noticed hereinbefore, column No. 4 of the prescribed form reads "amount credited or paid in pursuance of the contract". However, in the reasons recorded the respondent has stated that as per TDS certificate the work done is shown at Rs. 20,51,903 while in the return of income the work done is shown at Rs. 1,98,800. The certificate of TDS does not speak of the work done. In fact u/s 194C of the Act the obligation to deduct tax arises either at the time of payment or at the time of crediting the account of the payee. The form i.e. Form No. 26C does not reflect that the payment or the credit is in relation to the work actually done. In both the situations, viz. at the time of credit to the account of the payee, or in case of actual payment, it is bound to be in pursuance of the contract and hence, from the same it is not possible to draw an inference that the credit/payment is for the work actually done. As the facts of the present case show, the work done pursuant to the contract in the year under consideration is to the tune of Rs. 1,98,800 and not sum of Rs. 20 lacs and odd as suggested by the respondent authority in the reasons recorded. In fact, on facts, there is no basis for recording such a decision that the total amount of Rs. 20,51,903 is payment for work done.

In the aforesaid set of facts and circumstances of the case, the reopening is not permissible in law considering the fact that notice u/s 148 of the Act has been issued after a period of four years from the end of assessment year in question in absence of any evidence to show any failure or omission on the part of the assessee to disclose truly and fully all relevant particulars of income in the return of income. Accordingly impugned notice dt. 31st March, 1994 (Annex. ''A'') is hereby quashed and set aside.

The petition is allowed accordingly. Rule made absolute. There shall be no order as to costs.