Naresh Bahl vs Union of India (UOI)

Sanjiv Khanna, J.—The Petitioner Naresh Bahl has filed the present petition for quashing of the notice dated 1st November, 2007 for the assessment year 2002-03 issued u/s 148 of the Income Tax Act, 1961 (Act, for short) and the notice u/s 143(2) of the Act dated 4th April, 2007 directing him to attend the office of the assessing officer and for other consequential reliefs. The allegation is that the aforesaid proceedings have been malafidely instituted, are repetitive and are illegal being in violation of law.

The Petitioner is self employed and engaged in the trade of sale of ball bearings. He is operating from his office located at G.B. Road, New Delhi and he is regularly filing his income tax returns. In 1999, sister of the Petitioner got married to one Satish Mal. In 2003, she left her matrimonial home and came back to reside with her parents. She filed a complaint against the family of Satish Mal in the Crime Against Women cell. The allegation in the writ petition is that the family of Satish Mal has some connection and their relatives are working in the Income Tax department and that the family of Satish Mal, in view of the influence and contacts, has been filing frivolous complaints to put pressure on the Petitioner and his family.

Documents placed on record show that during the period between 2004 till 2007 the Petitioner had received the following notices and has complied with the directions issued by different officers of the income tax department from time to time:

i) Notice dated 18th May 2004, seeking information u/s 133(5) of the Act for assessment year 2000-01 in respect of marriage expenses of the Petitioner''s sister. This notice was duly replied and answered.

ii) Thereafter, statement of the Petitioner was recorded u/s 133(5) of the Act on 30th June, 2004. He answered the questions put to him by Mr. Mohan Lal, Income Tax Officer, Ward 28(1). Proceedings thereafter were closed and nothing further was heard.

iii) Notice u/s 131 of the Act on 17th May, 2006 was again issued by the Income Tax Officer, Ward 28(1) to personally attend the office on 22nd May, 2006. The notice required the Petitioner to furnish copy of income tax returns for the period 2000-01 onwards, list of family members, details of expenditure on family members and marriages and list of movable and immovable properties, personal deposits etc. In response to the said notice a reply dated 5th June, 2005 was sent enclosing the required documents. In the reply it was stated that the Petitioner had earlier, in 2004, furnished document and answered the queries and his statement was recorded. Reference was also made to the matrimonial dispute between the Petitioner''s sister and her in-laws. It was further stated that the Petitioner had deposited an FDR of Rs. 2 lakhs in the court of the metropolitan magistrate in connection with the matrimonial discord between him and his wife. Funds for the deposit were procured from the Petitioner''s mother, relatives and friends. The said FDR was not related to the Petitioner''s firm account. He wrote another letter dated 30th June, 2006 making allegations that he was being harassed because of the disputes between his sister and her in-laws. He also submitted his latest electricity and telephone bills along with the said letter as these were required to be furnished.

iv) A detailed statement of the Petitioner was recorded by Mr. N.D. Khatter, Income Tax officer, Ward 28(1) on 19th June, 2006. As many as twenty four questions were asked including questions with regard to payment to advocates, marriage expenses, business of father etc. Questions were also asked with regard to the FDR of Rs. 2 lakhs which were answered and it was stated that the FDR was given to secure bail for the Petitioner himself and his family members in terms of orders passed by the High Court. The funds, it was stated, were contributed by his mother, relatives and friends.

v) The Petitioner received another notice u/s 131(1A) of the Act dated 3rd August, 2006 from the Mr. T.P. Shukla, Additional Director of Income Tax (Inv.), Unit 1, Jhandewalan, New Delhi. The Petitioner was asked to personally attend the office of the said officer on 18th August, 2006 with details of bank accounts, passbooks and details of moveable and immovable properties. His statement on oath were again recorded by Mr. T.P. Shukla on 21st August, 2006, 24th August, 2006, and on 29th August, 2006. The Petitioner has applied for copies of the said statements under the Right to Information Act, 2005 but these have not been made available to him. On 5th September, 2006 the Petitioner furnished several documents including copies of balance sheets from 2000 onwards, details of bank accounts etc. Some more documents were also furnished to Additional Director, Income Tax Department on 4th October, 2006.

vi) Income Tax Officer, Ward 27(2), New Delhi issued notice u/s 133(6) dated 3rd January 2007 calling upon the Petitioner to furnish the details of the ward where he was assessed, his PAN, copy of bank accounts maintained by him in last three years, list of moveable and immoveable properties in his and his family members'' names, nature of business and source of income. The Petitioner was warned that in case information was not furnished on or before 9th January, 2007, it would lead to action u/s 272A(2)(c) of the Act and penalty of Rs. 100 for each day of default shall be imposed upon him. This notice was again replied by the Petitioner.

Thereafter the impugned notices u/s 147 and 143(2) dated 11th January 2007 and 4th April, 2007 have been issued for the assessment year 2002-03.

The facts stated above show the harassment suffered by the Petitioner for the last nearly four years. One after the other he is being asked to repeatedly appear and respond to notices. His statements have been recorded on five occasions, once in 2004 and four times in 2006. The original file produced before us show that the entire action had been initiated on a complaint dated 23rd April, 2004 by R.C. Mal. It also appears from the file that proceedings u/s 147 have been initiated against the father of the Petitioner, A.N. Bahl for assessment year 2000-01. We are not concerned with the said proceedings.

The reasons recorded for reopening of assessment by the assessing officer are as under:

In response to Tax Evasion Petition in the case of Shri Naresh Bahl, Investigation Wing has made enquiries and sent a report to the Commissioner of Income Tax, Delhi- X, New Delhi. It has been suggested by the Investigation Wing that Shri Naresh Bahl is leading a lavish life, maintaining a luxury car (Wagon R) and maintain all other luxury items at his residence. He had paid Rs. Rs. 2 Lakhs FDR for obtaining bail in the court for himself and his family members u/s 498A and 406 I.P.C. in the court of Addl Session Judge during the financial year 2000-02. Shri Naresh Bahl has explained that the funds were contributed by his mother in cash and by his friends and relatives in cheque. Obviously his mother is only a house wife and has no source of income of her own. The explanantion given by Shri Naresh Bahl appears to be a self serving one and source is not explained. The Investigation Wing has suggested that proceedings u/s 147 may be initiated against Shri Naresh Bahl for the financial year 2001-02 relevant to the assessment year 2002-03.

In view of the above I am of the opinion that Rs. 2 Lakhs has escaped assessment in the hand of Shri Naresh Bahl for the financial year 2001-02 relevant to the assessment year 2002-03. It is therefore proposed to issue notice u/s 148 in the above mentioned case. Your kind permission may be accorded to issue notice u/s 148.

(emphasis supplied)

It is well settled that the reason to believe has to be something more than mere suspicion or apprehension though at the stage of issue of notice only tentative opinion is required to be formed. In the present case we are not satisfied that the preconditions u/s 147 read with Section 148 of the Act are satisfied. In the present case, it is apparent from the aforesaid facts that the Respondents are not acting in just, fair and equitable manner. They have exceeded the jurisdiction, thus causing harassment and prejudice to the Petitioner. The reasons recorded are nothing but repetition of the enquiry which was earlier initiated and examined but nothing substantial was found.

The first portion of the reasons is factually incorrect as the report of the Deputy Director of Income Tax Investigation states that the Petitioner denied owning any car or Wagon R. Further enquiries from the transport department had revealed that the car was in the name of a third person who was a resident of Pitampura. The report does not suggest that the Petitioner was the benami or the actual owner of the car. With regard to the FDR of Rs. 2 lakhs, the reasons recorded show that the amount contributed by the Petitioner''s mother in cash and, relatives and friends by cheque. Detailed statement of the Petitioner was recorded with regard to the FDR of Rs. 2 lakhs on 19th June, 2006 and then twice/thrice by the Investigation Wing. No enquiries, thereafter, were made by the Respondents from the persons concerned or from the concerned bank from where the cheques were issued. The statements of the mother, relatives or of the friends were not recorded. No enquiries have been made from them. The facts noted above show and establish in the present case that for nearly three years from 2004 to 2007, detailed enquiries have been conducted by the different officers. The present case is unusual and peculiar and such detailed enquiries are normally conducted if and after re-assessment proceedings are initiated. In the present case enquiries have been conducted prior to issue of notice u/s 148 of the Act. The Petitioner has been complying with the notices issued to him and has furnished information. His statements have been recorded on five occasions. Now, after more than three years, re-assessment notice has been issued.

In view of the aforesaid, the notice dated 1st November, 2007 for the assessment year 2002-03 issued u/s 148 of the Act and the resultant notice u/s 143(2) of the Act dated 4th April, 2007 are quashed. In the result, the writ petition is allowed without any order as to costs.