HC justified Reassessment on Maharashtra Minister and validates notice issued within 5 hours

Case Details: Chhagan Chandrakant Bhujbal v. ITO - [2022] 136 taxmann.com 24 (Bombay)

Judiciary and Counsel Details

• • K.R. Shriram and Amit B. Borkar, JJ.
  • K. Gopal, Jitendra Singh and Om Kandalkar for the Petitioner.
  •  Sham V. Walve for the Respondent.

Facts of the Case

The assessee was Maharashtra’s Cabinet Minister. His return of income for the Assessment Year 2012-13 was accepted without scrutiny, and an assessment order was passed. Later, the Assessing Officer received a letter via email stating that the assessee had defrauded the Maharashtra Government. He had prepared fabricated/bogus documents and used them as genuine documents to get a plot for building the State Central Library.
Based on said information, AO issued a reassessment notice to the assessee on the same day. The assessee challenged the reassessment notice before the Bombay High Court.

The assessee contended that AO received the information only at 5.47 p.m, and the reassessment notice was issued at about 10:49 p.m. on the same day. Thus, how could the authority, which had granted the sanction for issuance of notice, could be said to have applied his mind.

High Court Held

The Bombay High Court held that the test to be applied for reassessment is whether there was reason to believe that income had escaped assessment and whether the Assessing Officer has tangible material before him to form that belief.

Once a tangible basis has been disclosed for reopening the assessment, it would not be appropriate for the court to prevent an enquiry whatsoever by the Assessing Officer. In the instant case, the reasons indeed disclosed by the AO what is that tangible material.

The power vested in the commissioner to grant or not grant approval to the AO to reopen an assessment is coupled with duty. The commissioner is duty-bound to apply his mind to the proposal put up to him for the approval in the light of the material relied upon by the AO. Such power cannot be exercised casually, in a routine and perfunctory manner.

Considering the facts and circumstances of the instant case, there was nothing to indicate that there was non-application of mind. Merely because the information was received at 5.47 p.m. and the notice was issued by 10:49 p.m. would not mean there had been non-application of mind. If the court holds that it would be merely speculative and based on conjecture.

Case Review

• • CIT v. Kelvinator of India Ltd. [2010] 187 Taxman 312/320 ITR 561 (SC) (para 9);
  • Export Credit Guarantee Corporation of India Ltd. v. Addl. CIT [2015] 228 Taxman 28 (Mag.)/[2013] 30 taxmann.com 211/350 ITR 651 (Bom.) (para 9);
  • Amaya Infrastructure (P.) Ltd. v. ITO [2017] 79 taxmann.com 345 [2016] 383 ITR 498 (Bom.) (para 13) and
  • German Remedies Ltd. v. Dy. CIT [2006] 152 Taxman 269/287 ITR 494 (Bom.) (para 11) followed.
  • Pr. CIT v. Shodiman Investments (P.) Ltd. [2018] 93 taxmann.com 153/[2020] 422 ITR 337 (Bom.) (para 12) distinguished.

List of Cases Referred to

• • German Remedies Ltd. v. Dy. CIT [2006] 152 Taxman 269/287 ITR 494 (Bom.) (para 6)
  • Pr. CIT v. Shodiman Investments (P.) Ltd. [2018] 93 taxmann.com 153/[2020] 422 ITR 337 (Bom.) (para 6)
  • Amaya Infrastructure (P.) Ltd. v. ITO [2017] 79 taxmann.com 345/[2016] 383 ITR 498 (Bom.) (para 7)
  • CIT v. Kelvinator of India Ltd. [2010] 187 Taxman 312/320 ITR 561 (SC) (para 9)
  • Export Credit Guarantee Corporation of India Ltd. v. Addl. CIT [2015] 228 Taxman 28 (Mag.)/[2013] 30 taxmann.com 211/350 ITR 651 (Bom.) (para 9).