Harsh Kaushal Corporation v. ITO

Case snapshot

Sections / provisions: Section 147; 148; 22

Questions before the Court / Tribunal

• Section 147 – Reopening beyond four years – Reopening done to tax deemed rental income relying on Delhi High Court decision in CIT vs. Ansal Housing Finance and Leasing Company Ltd (2013) 354 ITR 180 – Held reopening is bad in law as all primary facts disclosed during original assessment proceedings-Recorded reasons do not state what is not disclosed by Assessee – also change of opinion about manner of computation. Reopening was done beyond four years relying on decision of Delhi High Court decision in CIT vs. Ansal Housing Finance and Leasing Company Ltd (2013) 354 ITR 180 to tax net deemed rental income of Rs 1,99,31,845/- has escaped assessment on closing stock of Rs 33,49,89,003/- . It was held that it was evident from the reasons recorded for reopening that the petitioner had truly and fully disclosed all material facts necessary for the purpose of assessment. In fact, in the…
• Which factual, statutory and procedural conditions controlled the requested relief?
• How did the forum apply the governing provisions to the evidence and procedural history recorded in this case?

Material facts and procedural background

932-oswp-1179-22.doc IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 1179 OF 2022

Harsh Kaushal Corporation … Petitioner. V/s. Income Tax Officer, Ward 22(1)(1), Mumbai and ors. … Respondents. ---------------- Mr. Rahul K Hakani i/b Ms Niyati Mankad for the Petitioner. Mr. Akhileshwar Sharma for the Respondent – Revenue. ---------------- CORAM : K.R. SHRIRAM & N.R. BORKAR, JJ. DATE : APRIL 26, 2022. PC 1] This petition takes exception to the notice dated 30.03.2021 issued by respondent No.1 under section 148 of the Income Tax Act, 1961 (for short “the Act”) seeking to reopen the assessment for Assessment Year (A.Y.) 2014 -15 and the order on objections dated 28.01.2022 passed by the respondent No.2. 2] The petitioner is a registered partnership firm registered under the Indian Partnership Act, 1932 and is engaged in the business of construction. Dinesh Sherla 1/8

932-oswp-1179-22.doc 3] The petitioner filed its original return of income in terms of section 139 of the Act for A.Y. 2014-2015 on 30.09.2014 declaring total income of Rs.3,69,780/- . 4] The petitioner’s return was selected for scrutiny assessment. Notice under section 142(1) of the Act calling upon the petitioner to furnish return of income, computation of income etc. to complete assessment was issued and the same was complied with vide submission dated 02.06.2016. 5] It is stated that vide submission dated 13.12.2016 the petitioner pointed out to the Assessing Officer that they have completed the project under the name and style “ Crystal Point” in the year 2009 and revenue would be offered as and when sale takes place. The petitioner has also pointed out that they have a closing stock-in-trade of Rs.33,49,89,003/-. 6] According to the petitioner, show cause notice was thereafter issued calling upon the petitioner to explain whether the petitioner was receiving rental income and if the rental income was being received out of stock-in-trade, then why the closing stock was not shown in Dinesh Sherla 2/8

7] According to the petitioner, respondent No.1 after scrutinizing all the details furnished by the petitioner, examining all the issues and the explanation given by the petitioner passed an assessment order dated 30.12.2016 under section 143(3) of the Act. 8] According to the petitioner, inspite of above facts and circumstances and though there is no failure on the part of the petitioner to disclose fully and truly all material facts, the respondent No.1, after expiry of four years from the end of relevant assessment year, had issued impugned notice dated 30.03.2021 under section 148 of the Act stating therein that in view of the decision of Delhi High Court in CIT vs. Ansal Housing Finance and Leasing Company Ltd. 1, it was obligatory on the part of petitioner to offer to tax notional rental income on closing stock-in-trade of Rs.33,49,89,033. According to the respondent No.1, he has thus reason to believe that the petitioner’s income chargeable to tax for A.Y. 2014-15 has escaped assessment within the meaning of section 147 of the Act. 1 (2013) 354 ITR 180 Dinesh Sherla 3/8

932-oswp-1179-22.doc 9] The petitioner on 13.11.2021 filed objections to reopening. Respondent No.2 rejected the objections by impugned order dated 28.01.2022. 10] We have heard Mr. Rahul Hakani, learned Counsel for the petitioner and Mr. Akhileshwar Sharma, the learned counsel for the respondents- Revenue. 11] Mr. Hakani submits that the existence of a valid reason to believe is a sine qua non for the exercise of jurisdiction under section 147 of the Act. It is submitted that the reasons for reopening assessment must be based on new information or material, however, in the present case, the Assessing Officer is seeking to reopen the reassessment proceedings based on the same material facts which were before him when he concluded the original assessment proceedings. It is submitted that reassessment without any additional information amounts to change of opinion and the same is not permissible. 12] It is further submitted that the proviso to section 147 of the Act provides that where an assessment under section 143(3) of the Act has been made for relevant assessment year and four years from the end of Dinesh Sherla 4/8

Appellant / petitioner / assessee submissions

932-oswp-1179-22.doc investment. Petitioner by letter dated 26.12.2016 submitted the documents/details in that respect as sought by the Assessing Officer.

Revenue / respondent submissions

The judgment does not separately label the respondent’s submissions in an independently extractable passage. No contention is inferred; read the full record.

Court / Tribunal analysis and reasoning

932-oswp-1179-22.doc 15] In the present case, it is evident from the reasons recorded for reopening that the petitioner had truly and fully disclosed all material facts necessary for the purpose of assessment. In fact, in the reasons for reopening, there is not even a whisper as to what was not disclosed. The Assessing Officer has relied upon the records filed by petitioner including the profit and loss account and balancesheet and says from those records it is revealed that there is closing stock in trade of Rs.33,49,89,003/-. Therefore, the respondent No.1 is relying upon the same primary facts which were before the Assessing Officer who concluded the assessment proceedings to take a different view. In our view, this is not a case where the assessment is sought to be reopened on the reasonable belief that income had escaped assessment on account of failure of assessee to disclose truly and fully all material facts that were necessary for computation of income but this is a case wherein the assessment sought to be reopened on account of change of opinion of the Assessing Officer about the manner of computation. In view of proviso to section 147 of the Act, the same is not permissible. Dinesh Sherla 7/8

Operative decision and relief

932-oswp-1179-22.doc 16] This Court in Ananta Landmark Pvt. Ltd. vs. Deputy Commissioner of Income Tax Central Circle 5(3) and ors.2 has held: “The Assessing Officer has no power to review an assessment which has been concluded. If a period of four years has lapsed from the end of relevant year, the Assessing Officer has to mention what was the tangible material to come to the conclusion that there is an escapement of income from assessment and that there has been failure to fully and truly disclose material fact. After a period of four years even if the Assessing Officer has some tangible material to come to the conclusion that there is an escapement of income from assessment, he cannot exercise the power to reopen unless he discloses what was the material fact which was not truly and fully disclosed by the assessee.” 17] Consequently , Petition is allowed. The notice dated 30.03.2021 issued by respondent No.1 under section 148 of the Act seeking to reopen the assessment for the A.Y. 2014-15 and the order on objections dated 28.01.2022 are quashed and set aside. 18] Petition is disposed of with no order as to costs.

Ratio and legal principle

The narrow proposition associated with Harsh Kaushal Corporation v. ITO concerns section 147 – reopening beyond four years – reopening done to tax deemed rental income relying on delhi high court decision in cit vs. ansal housing finance and leasing company ltd (2013) 354 itr 180 – held reopening is bad in law as all primary facts disclosed during original assessment proceedings-recorded reasons do not state what is not disclosed by assessee – also change of opinion about manner of computation. reopening was done beyond four years relying on decision of delhi high court decision in cit vs. ansal housing finance and leasing company ltd (2013) 354 itr 180 to tax net deemed rental income of rs 1,99,31,845/- has escaped assessment on closing stock of rs 33,49,89,003/- . it was held that it was evident from the reasons recorded for reopening that the petitioner had truly and fully disclosed all material facts necessary for the purpose of assessment. in fact, in the… The proposition cannot be separated from the judgment’s facts, the governing statutory version, the forum’s jurisdiction, and the exact relief recorded in WRIT PETITION NO. 1179 OF 2022.

For working-paper purposes, the decision should be cited only after matching the material facts and reading the passages under the judgment-grounded record above. The editorial outcome label “Quashed / set aside” is a navigation aid; it does not replace the operative order or explain every issue in a multi-issue case.

Why this judgment matters

This decision is relevant when a file raises the same central question identified in the source headnote: Section 147 – Reopening beyond four years – Reopening done to tax deemed rental income relying on Delhi High Court decision in CIT vs. Ansal Housing Finance and Leasing Company Ltd (2013) 354 ITR 180 – Held reopening is bad in law as all primary facts disclosed during original assessment proceedings-Recorded reasons do not state what is not disclosed by Assessee – also change of opinion about manner of computation. Reopening was done beyond four years relying on decision of Delhi High Court decision in CIT vs. Ansal Housing Finance and Leasing Company Ltd (2013) 354 ITR 180 to tax net deemed rental income of Rs 1,99,31,845/- has escaped assessment on closing stock of Rs 33,49,89,003/- . It was held that it was evident from the reasons recorded for reopening that the petitioner had truly and fully disclosed all material facts necessary for the purpose of assessment. In fact, in the… Its practical value lies in the way the Bombay High Court connected the governing provisions—Section 147; 148; 22—to the procedural posture and evidence before it.

The authority level is High Court. That affects persuasive or binding weight, but authority level alone is never enough. Territorial jurisdiction, statutory period, the identity of the challenged order, and later appellate treatment must all be checked before the case is used in advice, a submission, or litigation strategy.

Practitioner action points

• Begin with the complete judgment and mark the paragraphs supporting the exact proposition relied upon.
• Match the statutory version of Section 147; 148; 22 and the decision date 2022-04-26; do not assume the current text is identical.
• Compare the notice, assessment, appeal or other procedural sequence with the chronology recorded in this case.
• Verify the stated later-history status and any review, appeal, SLP, curative or rectification proceedings before citation.
• Record why the client’s evidence is materially similar, and also record any fact capable of distinguishing the result.

Does this case match your facts?

Detailed reliance and distinction analysis

Identity check. Confirm that the cited cause title is Harsh Kaushal Corporation v. ITO, the proceeding is WRIT PETITION NO. 1179 OF 2022, and the decision is dated 2022-04-26. These fields are taken from the judgment record and should appear exactly in the citation note.

Bench check. The judgment identifies the coram as K.R. SHRIRAM & N.R. BORKAR, JJ.. A later order by another bench, a larger bench, or a higher forum may alter the weight or interpretation of the proposition.

Provision check. The source associates the dispute with Section 147; 148; 22. The practitioner should place the historical statutory text next to the current text and identify every amendment, proviso, explanation, rule or notification that could change the analysis.

Fact check. The source issue is not a free-standing abstract rule. It arises from the concrete record summarized above. A reliable application note should list the common facts, the different facts, and whether each difference affects jurisdiction, admissibility, limitation, burden, computation or relief.

Remedy check. The recorded result is Quashed / set aside. Where a matter is remanded, set aside, partly allowed, or disposed with directions, the exact operative language is more important than a binary winner/loser label.

History check. The current closure state is REVIEW_APPEAL_SLP_CHECK_PENDING. If that state is pending, the page does not assert that no later case exists. It means the check remains open and must be completed at the point of professional reliance.

Section / provision impact

• Section 147 — apply the exact version considered in the judgment.
• 148 — apply the exact version considered in the judgment.
• 22 — apply the exact version considered in the judgment.

Case network

• Adityaraj Builders v. State of Maharashtra — Bombay High Court · Quashed / set aside
• Sanket Vinayak Nagvekar v. ITO — Bombay High Court · Quashed / set aside
• Hero Products India Pvt. Ltd. v. NFAC — Bombay High Court · Quashed / set aside
• Pr. CIT v. Macleods Pharmaceuticals Ltd. — Bombay High Court · Quashed / set aside

Related Finin2min resources

• Case Law Hub
• Search all 592 judgments
• Explore Reassessment & Reopening

Full judgment and source control

Read / download packaged judgment record

Source class: OFFICIAL_PRIMARY_SEARCH_PENDING · Repository status: PUBLISH_READY