Nirmal Bang Securities Pvt. Ltd. v. ACIT

Case snapshot

Sections / provisions: 147

Questions before the Court / Tribunal

• S. 147 : Reassessment-After the expiry of four years-No failure to disclose material facts-Information based on search of third party -Reason recorded not indicated anywhere or any stretch of imagination the income has escaped assessment–Non application of mind by the sanctioning authority–Observed that the Assessing Officers will record better reasons for reopening and the Authority granting approval will also apply their mind sincerely before granting approval – Re assessment proceedings was quashed [ S. 148, 151, Art. 226.] The assessment was completed under section 143(3) of the Act, asking for various details. Thereafter the assessment was reopened on the ground that a large cash transaction was received. Upon consideration of submissions no addition was made. The assessment once again reopened after the expiry of four years. In the reasons supplied it was stated that on the basis…
• 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

909-WP671-2022.DOC Santosh IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 671 OF 2022 Nirmal Bang Securities Pvt. Ltd. Mumbai ...Petitioner Versus Asst. Commissioner of Income Tax Circle 4(2)(1), Mumbai & anr. ...Respondents Dr. K. Shivaram, Senior Advocate, i/b Mr. Rahul Hakani, for the Petitioner. Mr. Sham V. Walve, i/b Mr. Suresh Kumar, for the Respondents. CORAM: K. R. SHRIRAM & N. J. JAMADAR, JJ DATED: 8th FEBRUARY, 2022 (Video Conferencing) Order:- 1. No reply has been filed and by consent of the parties taken up for admission/disposal, at this stage itself. 2. Prayer clause (a) of the petition reads as under: “(a) that this Hon’ble Court may be pleased to issue a Writ of Certiorari or a Writ in the nature of Certiorari or any other appropriate Writ, order or direction, calling for the records of the Petitioner’s case and after going into the legality and propriety thereof, to quash and set aside the said (i) Notice u/s 148 dated 31 st March, 2021 (Exh.”A”), (ii) the impugned order dated 13/1/2022 being (Exh.”B”) and (iii) Notice u/s 142(1) dtd.20/1/2022 being (Exh.”C”).” 3. Petitioner is a stockbroking firm and returned an income of Rs.1,03,30,630/- for Assessment Year 2013-2014. During the course of assessment proceedings, Assessing Officer issued 1/6

909-WP671-2022.DOC notice dated 13th July 2015 under Section 142(1) of the Income Tax Act, 1961 ("the Act") asking for various details. The assessment of petitioner for Assessment Year 2013-2014 was completed under Section 143(3) of the Act assessing total income at Rs.9,10,95,756/-. Thereafter, assessment was reopened under Section 147 vide notice dated 30th March 2018 under Section 148 as information about large value cash transaction was received. Upon considering the submissions made as well as the documents submitted by petitioner no addition was made and income was assessed as per order dated 19 th April, 2018 passed in appeal under Section 250 against the original assessment order. 4. The assessment of petitioner is now again proposed to be reopened by issuing notice dated 31 st March 2021 under Section 148 of the Act. The reasons supplied to petitioner for reopening are as under:- “In this case, search information is received with regard to accommodation entry, STR etc in which assessee is beneficiary, the details of which are as under: S. NO. Case Packet Source Packet Source Description Source Name Informat ion Type Value 1 Enquiry --- DLS Exports Pvt. Ltd. Others Rs.4,40,00,000/- 2. Enquiry FIU-IND Startree Dealcom Pvt. Ltd. Others Rs.5,50,000/- 3. Enquiry Accommod Nectar Others Rs.6,54,623/- 2/6

909-WP671-2022.DOC ation entries from shell entities Dealtrade Pvt. Ltd. 4. Enquiry FIU-IND Suspicious Transactio n Report Others Rs.1,85,00,000/- 5. Enquiry Unexplaine d Credit Suspicious Transactio n Report Cash Deposit Rs.71,50,000/- Total Value Rs.7,08,54,623/- In view of the above facts and after due application of mind after analyzing all the relevant information in the case of assessee in totality, I have reason to believe that income of Rs.7,08,54,623/- has escaped assessment for A.Y.2013-14 and the same is therefore required to be reopened for scrutiny assessment.” 5. As could be seen from the reasons quoted above, it is bereft of any material. It does not indicate what address was searched, from whom such information was received, what date the search happened, what date the information was received, what was the information etc. Admittedly a copy of the information received also has not been provided to petitioner to enable petitioner to effectively deal with the reasons. 6. Notwithstanding receiving these reasons, without any details available, petitioner filed its objection by a communication dated 12 th August, 2021. Petitioner objected to the reopening on the following grounds: (i) There was no failure on the part of petitioner to disclose fully and truly all material facts necessary for assessment and recorded reasons do not record such failure. 3/6

909-WP671-2022.DOC (ii) Reopening is done without own satisfaction of respondent no.1. (iii) There is no live nexus between the material and formation of belief about escapement of income. (iv) The reasons are vague and factually incorrect. Based on the decisions of the Courts, the proposed notice issued for reopening of assessment is without jurisdiction, hence, the reopening is bad in law. (v) The reopening notice was issued on the ground of factually incorrect basis which is bad in law. 7. These objections were rejected by an order dated 13 th January 2022 without dealing with any of the objections of petitioner on factual aspects of the issues involved. It is this order dated 13 th January 2022, which is also impugned in this petition. 8. Admittedly the notice for reopening has been issued four years after the expiry of the relevant assessment year. Therefore, reopening is barred unless respondent is able to show that petitioner had failed to disclose fully and truly all material facts for assessment. 9. Mr. Walve relied upon a judgment of this Court in Crompton Greaves Ltd. V/s. Assistant Commissioner of Income Tax,Circle 6 (2) 41 to submit that even if the reason for reopening 1 (2015) 55 taxmann.com59 (Bombay) 4/6

909-WP671-2022.DOC does not specifically state that there was any failure on the part of petitioner to disclose fully and truly all material facts necessary for its assessment for the relevant assessment year, it will not be fatal to the assumption of jurisdiction under Sections 147 and 148 of the Act. We would certainly agree with Mr. Walve but as held in Crompton Greaves Ltd. (Supra), this is subject to the rider that there must be cogent and clear indication in the reasons supplied, that in fact there was failure on the part of assessee to disclose fully and truly all the material facts necessary for its assessment. If the factum of failure to disclose can be culled from the reasons in support of the notice seeking to reopen assessment, that will certainly not be fatal to the assumption of jurisdiction under Sections 147 and 148 of the Act. The Court held “However, if from the reasons, no case of failure to disclose is made out, then certainly the assumption of jurisdiction under Sections 147 and 148 of the Act would be ultra vires, being in excess of the jurisdictional restraints imposed by the first proviso to Section 147 of the Act”. 10. Having seen the reasons, no case of failure to disclose is made out. The factum of failure to disclose cannot be culled from the reasons in support of the notice seeking to reopen the assessment. Therefore, certainly it will be fatal to the assumption of jurisdiction under Sections 147 and 148 of the 5/6

Appellant / petitioner / assessee submissions

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

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

The concise order integrates its reasoning with the operative directions. The complete packaged record controls.

Operative decision and relief

909-WP671-2022.DOC Act. 11. On this ground alone, the prayer clause (a) as quoted above is hereby granted. 12. We also have to observe that the reason recorded for reopening as noted earlier, is bereft of any material or information. We wonder what prompted the jurisdictional Assessing Officer to write such a bald and toothless reason. Certainly the reasons, as recorded, cannot even indicate anywhere or by no stretch of imagination can it be concluded that any income has escaped assessment. We are also surprised that by reading these reasons, approval under Section 151 has been granted, which also indicates clear non-application of mind by the authority which granted the approval. 13. We only hope that respondents’ officers will record better reasons for reopening and the authority granting approval will also apply their mind sincerely before granting an approval. 14. Petition disposed with no order as to costs. [N. J. JAMADAR, J.] [K. R. SHRIRAM, J.] 6/6

Ratio and legal principle

The narrow proposition associated with Nirmal Bang Securities Pvt. Ltd. v. ACIT concerns s. 147 : reassessment-after the expiry of four years-no failure to disclose material facts-information based on search of third party -reason recorded not indicated anywhere or any stretch of imagination the income has escaped assessment–non application of mind by the sanctioning authority–observed that the assessing officers will record better reasons for reopening and the authority granting approval will also apply their mind sincerely before granting approval – re assessment proceedings was quashed [ s. 148, 151, art. 226.] the assessment was completed under section 143(3) of the act, asking for various details. thereafter the assessment was reopened on the ground that a large cash transaction was received. upon consideration of submissions no addition was made. the assessment once again reopened after the expiry of four years. in the reasons supplied it was stated that on the basis… 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. 671 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: S. 147 : Reassessment-After the expiry of four years-No failure to disclose material facts-Information based on search of third party -Reason recorded not indicated anywhere or any stretch of imagination the income has escaped assessment–Non application of mind by the sanctioning authority–Observed that the Assessing Officers will record better reasons for reopening and the Authority granting approval will also apply their mind sincerely before granting approval – Re assessment proceedings was quashed [ S. 148, 151, Art. 226.] The assessment was completed under section 143(3) of the Act, asking for various details. Thereafter the assessment was reopened on the ground that a large cash transaction was received. Upon consideration of submissions no addition was made. The assessment once again reopened after the expiry of four years. In the reasons supplied it was stated that on the basis… Its practical value lies in the way the Bombay High Court connected the governing provisions—147—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 147 and the decision date 2022-02-08; 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 Nirmal Bang Securities Pvt. Ltd. v. ACIT, the proceeding is WRIT PETITION NO. 671 OF 2022, and the decision is dated 2022-02-08. 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. J. JAMADAR, 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 147. 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

• 147 — 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

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