Delhi H.C : Where in course of proceedings relating to reopening of assessment, first respondent passed on order accepting assessee’s objection that there was no evidence to connect him with certain properties allegedly acquired out of undisclosed income, he should have dropped reassessment proceedings and, therefore, impugned letter issued by first respondent calling upon assesee to avail of opportunity to cross examine complainant i.e. person, who was author of tax evasion petition, deserved to be quashed

High Court Of Delhi

Pradyot K. Misra VS. ACIT

Assessment Year : 2004-05

Section : 147, 148

S. Ravinder Bhat And R.V. Easwar, Jj.

W. P. (C.) No. 7977 Of 2011

February 17, 2014

JUDGMENT

R. V. Easwar, J. – This petition filed under article 226 of the Constitution of India seeks a writ quashing the notice dated March 31, 2011, issued by the Assistant Commissioner of Income-tax, Circle 40(1), New Delhi (first respondent), under section 148 of the Income-tax Act, 1961 (“the Act” for short) and the letter dated November 2, 2011, issued by him fixing the proceedings for further hearing on November 16, 2011.

2. The facts are not much involved. The petitioner is a retired officer of the Indian Revenue Service and served in various capacities including, inter alia, the position of the Chief Commissioner of Income-tax, Director General of Vigilance, Chief Vigilance Officer of the Central Board of Direct Taxes and Income-tax Ombudsman. In respect of the assessment year 2004-05, he filed a return of income declaring a total income of Rs. 4,10,917 consisting of salary income, property income and income from other sources. It was processed under section 143(1) of the Act. On March 31, 2011, a notice was received by him under section 148 of the Act seeking to reopen the assessment on the ground that income chargeable to tax had escaped assessment. The petitioner appears to have filed a return of income in response thereto and sought the reasons recorded to reopen the assessment. The reasons were furnished on June 27, 2011, to which the petitioner filed objections questioning the jurisdiction of respondent No. 1 to issue the notice. It was contended that the reasons recorded were not sufficient in law to entertain the belief that there was escapement of income, that the allegations levelled in the tax evasion petition on the basis of which the assessment was reopened were factually incorrect and further that the reassessment proceedings were barred by limitation. The first respondent did not agree with the objections and dismissed them, vide order dated July 25, 2011. Against the said order the petitioner filed W. P. (C.) No. 6011 of 2011 on August 17, 2011, impugning both the notices issued under section 148 and the order dismissing the objections of the petitioner. By order dated August 23, 2011, this court allowed the writ petition and directed the first respondent to pass a fresh order dealing with the petitioner’s objections, particularly the objection that the tax evasion petition on the basis of which the assessment was reopened contained factually incorrect allegations.

3. On September 30, 2011, the first respondent passed an order accepting the legal objections raised by the petitioner on the ground that there was no evidence to connect him with certain properties which were alleged in the tax evasion petition to have been acquired by him out of his undisclosed sources of income and further that the contents of the tax evasion petition were found to be factually incorrect. The first respondent wrote the following letter to the petitioner :

“To,

Sh. P. K. Misra

C/o. Sh. Y. Das

B-367, New Friends Colony,

New Delhi-110 025

Sir,

Sub. : Objections to the reopening of the assessment year 2004-05-Directions of the hon’ble Delhi High Court-Regarding

The hon’ble High Court, Delhi quashed the order of the undersigned dated July 25, 2011, and directed to pass fresh order after affording an opportunity of being heard. It was further directed that you or your authorised representative shall appear before the Assessing Officer on September 19, 2011.

The present reassessment proceedings were initiated, vide notice under section 148 dated March 31, 2011, after recording the reasons and after obtaining approval from the Additional Commissioner of Income-tax, Range-40, New Delhi. Objections were filed by you for the reopening of assessment on July 18, 2011. The objections filed were disposed of, vide this office order dated July 25, 2011, which were challenged by you by way of writ petition before the hon’ble High Court, Delhi.

On September 19, 2011, your authorised representatives, Sh. Rohit Garg, chartered accountant and Sh. Amit Sachdeva, advocate, appeared in this office and filed submissions dated September 19, 2011, and discussed the matter. It was pointed out by your authorised representative that initiation of reassessment proceedings were bad in law and void ab initio on the following grounds :

(1) there was no reason to believe that income of the assessee had escaped the assessment;

(2) the reasons recorded were factually incorrect inasmuch as the assessee has no connection whatsoever with the property, being plot B-8, Cosmopolitan Co-operative Housing Society Ltd., Hauz Khas, Mayfair Garden ; and

(3) the present reassessment proceedings are barred by limitation prescribed in section 149 of the Act inasmuch as the reasons recorded have been supplied to the assessee after the expiry of the period of six years from the end of the relevant assessment year.

I have considered the objections raised by you. The objection mentioned at ‘1 and 3’ above, the same were disposed of by me, vide order dated July 25, 2011. It is only with respect to objection 2 above for which the hon’ble High Court has quashed the order dated July 25, 2011.

There was tax evasion petition in which it was alleged that you had acquired the property bearing No. B-8 ground floor flat with basement and back garden made on 600 sq. yds. plot, Cosmopolitan Co-operative Housing Society Ltd., Hauz Khas, (Shahpur Jat known as Mayfair Garden), New Delhi, costing not less than 20 crores. Since there were allegations against your goodself with reference to purchase of the said property and the enquiries with reference to alleged purchase of the said property were not complete and the time-limit for issuing notice under section 148 was getting time barred on March 31, 2011, and to safeguard the interests of the Revenue there was no alternative but to issue notice under section 148 of the Income-tax Act, 1961. In order to verify veracity/genuineness of the contents of tax evasion petition with reference to acquisition of the aforesaid property, detailed investigations were carried out. Enquiries were made from the occupants of the aforesaid property with reference to ownership. Enquiries were also made from the Sub-Registrar’s office.

The results of enquiries do not connect the assessee with the property in question. It has been established on the basis of enquiries and documents gathered that the contents of the tax evasion petition with reference to purchase of Mayfair Garden property are not substantiated or corroborated. The contents of the tax evasion petition with reference to alleged purchase of the property No. B-8, Cosmopolitan Co-operative Housing Society Ltd., Hauz Khas (Shahpur Jat known as Mayfair Garden), New Delhi, by you are factually incorrect.

In view of the above, the objections filed by the assessee on July, 18, 2011, and again filed during the course of hearing on September 19, 2011, are disposed of.

Yours faithfully,

(Sd.)…. .

A. K. Dang,

Assistant Commissioner of Income-tax,

Circle 40(1), New Delhi.”

4. One would have thought that the matter ended there but on November 2, 2011, respondent No. 1 issued a letter to the petitioner in the following terms :

“To,

Sh. P. K. Misra

C/o. Sh. Y. Das

B-367, New Friends Colony,

New Delhi -110 025

Sir,

Sub. : Tax evasion petition in your case-Regarding

Kindly refer to on going proceedings for assessment year 2004-2005 in your case.

Sh. S.K. Srivastava, who is the complainant in this case, is proposed to be examined as a witness in support of his allegations against you upon his written request in this regard. Sh. Srivastava has informed this office that he will examine himself as his witness as well as other witnesses in support of his allegations against you and lead other evidence in the case. The case is fixed for hearing on November 16, 2011.

You are hereby informed that you may if you so desire, be present in this office on November 16, 2011, at 11 a.m. sharp when the evidence of Sh. S. K. Srivastava is to be taken by this office and if you so want cross-examine the witness as per law.

Considering the shortage of time available for conclusion of proceedings, it is informed that adjournment may kindly be not sought.

Yours faithfully,

(Sd.)….. .

A. K. Dang,

Assistant Commissioner of Income-tax,

Circle 40(1), New Delhi.”

5. It is necessary to mention here that on November 16, 2011, this court had stayed all further proceedings pursuant to the notice dated March 31, 2011, issued under section 148 of the Act.

6. The contentions of the petitioner deserve acceptance. Once the first respondent found, after due inquiries, that there was no basis to connect the petitioner with the Mayfair Garden property, he ought to have dropped the reassessment proceedings. Nothing survived thereafter. He was, therefore, acting outside the jurisdiction when he issued a letter on November 2, 2011, calling upon the petitioner to avail of the opportunity, if so advised, given to him to cross-examine the complainant, i.e., the person who was the author of the tax evasion petition. The only order which could have been passed by the first respondent, after finding that there was no basis for the tax evasion petition connecting the petitioner with the Mayfair Garden property, was to drop the proceedings initiated under section 148. Surprisingly one month after the first respondent wrote to the petitioner conceding that there was no basis for the tax evasion petition, he invited the petitioner to cross-examine the complainant, if so advised. Such a procedure is unknown to the Act. Instead of terminating the proceedings initiated under section 148 of the Act by dropping them the first respondent chose inexplicably to keep those proceedings alive. This is illegal and impermissible in law. This amounts to nothing but harassment of the petitioner. There appears to be some vested interest in keeping the proceedings against the petitioner pursuant to the notice dated March 31, 2011, alive. The tax evasion petition and the present proceedings seem to be the result of a personal vendetta between two officers of the Indian Revenue Service (IRS) (the complainant being one of them). This unfortunately has resulted in multiple proceedings before this court.

7. The respondents have to act in accordance with law and not under any pressure. The Assessing Officer being a responsible officer should not be a party or pressurised by someone to personal vendetta. Being statutory officers they have to act independently and in accordance with law.

8. The notice dated March 31, 2011, issued under section 148 of the Act as well as the impugned letter dated November 2, 2011, are hereby quashed. The writ petition is accordingly allowed.

[Citation : 362 ITR 24]