Vapi Infrastructure and Industrial Township LLP v ITO

Case snapshot

Sections / provisions: 147; 143(3); 133(6).

Questions before the Court / Tribunal

• Section 147 – Reopening – Lenders had shown very less income in the ITR – Held reopening is bad on account of change of opinion – High Court shows indulgence towards AO, refrains from issuing notice for perjury and imposing costs for making wrong statement in reply. Reopening was done beyond fours years on the ground that eight parties who had lent Rs Rs.27,87,70,259/- to Assessee had shown very less income in ITR’s. It was held that during the course of original Assessment Proceedings AO had verified and satisfied himself about the identity, creditworthiness and genuineness of lenders and had also issued Notices u/s 133(6) to the lenders and thus reopening was bad in law due to change of opinion. It was also observed that statement in the Affidavit in Reply that the credit worthiness of the creditor and genuineness of transaction have not been explained is
• 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

921-WP-996-2022.odt IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 996 OF 2022 Vapi Infrastructure and Industrial Township LLP … Petitioner Versus Income Tax Officer Ward – 22(3)(1) and others … Respondents …...... Mr. Rahul Hakani alongwith Mr. Ajay Singh instructed by Mr. Sameer G. Dalal for the Petitioner. Mr. Akhileshwar Sharma for the Respondents-Revenue. …...... CORAM : K.R. SHRIRAM AND N.R. BORKAR, JJ. DATED : APRIL 19, 2022 P .C. :- 1. Petitioner is a limited liability partnership firm engaged in the business of real estate and real estate development. The return of income for A.Y. 2014-2015 was filed by Petitioner on 31st July , 2014 declaring total income as ‘Nil’. The return was selected under CASS for scrutiny vide notice dated 31st August, 2015 issued under Section 143(2) of the Income-Tax Act, 1961 (the Act). Notice dated 30 th May , 2016 under Section 142(1) of the Act alongwith questionnaire was also issued and served on Petitioner. Petitioner filed its reply dated 6th June, 2016 providing all details including a note on the nature of business, return of income etc. alongwith profit and loss account and balance-sheet and relevant scheduled balance-sheet as on 31 st March, 2014 Kanchan P Dhuri 1 / 6

921-WP-996-2022.odt and details of bank accounts. 2. Another notice dated 6th September, 2016 under Section 142(1) of the Act was issued raising various queries which was replied to by Petitioner vide its letter dated 16 th September, 2016 providing further details. By another letter dated 6 th December, 2016 Petitioner submitted further details and documents including loan confirmation of eight parties alongwith copies of ITR, computation of income, bank statement etc. By another letter dated 19th December, 2016 Petitioner provided further details including a copy of assessment order under Section 143(3) of the Act for A.Y. 2013-2014, a copy of ITR, computation of income, balance-sheet etc. for A.Y. 2013-2014. 3. In the meanwhile, on or about 11 th November, 2016, Respondent No.1 had also issued notices to various parties under Section 133(6) of the Act for verification and confirmation of loan transactions and called for supporting documents. The said parties had responded and also disclosed their identity , explained credit worthiness, genuineness of transactions, source of funds etc. 4. Assessment for A.Y. 2014-2015 was completed under Section 143(3) of the Act and an assessment order dated 19 th December, 2016, after considering responses of parties to notices issued under Section 133(6) of the Act and all documents and explanations submitted by Petitioner, came to be passed. Kanchan P Dhuri 2 / 6

921-WP-996-2022.odt 5. Thereafter, Petitioner received impugned notice dated 31 st March, 2021 from Respondent No.1 alleging that there are reasons to believe Petitioner’s income chargeable to tax for A.Y. 2014-2015 has escaped assessment. Petitioner filed its returns again and as requested by Petitioner, reasons for re-opening was also provided by Respondent No.1, by a communication dated 12 th October, 2021. As stated in the reasons, according to Respondent No.1, Petitioner had unsecured loans of Rs.1,17,48,08,731/- during A.Y. 2014-2015. Out of this Rs.27,87,70,259/- was net amount of loan received during the year. Petitioner had provided confirmation from the loan providers but it is observed that income of the loan providers was very low during the year as per the chart shown in the reasons. As the loan given by those parties has been credited in the books of Petitioner during the year under consideration and as the assessee offered no explanation, i.e., about the nature and the source of the above loan, the credit worthiness of the creditor and genuineness of the transaction has not been explained, the source of above loan remains unexplained and needs to be added to the total income of the assessee. 6. Petitioner vide a letter dated 21 st October, 2021 filed its objection for re-opening. In the objection, Petitioner specifically has mentioned that specific queries were raised during assessment proceedings for the loans Kanchan P Dhuri 3 / 6

921-WP-996-2022.odt provided, details have been provided to the assessing officer who had also independently issued notices under Section 133(6) of the Act to which third parties had replied and provided the required documents explaining their identity , credit worthiness and genuineness of the loans provided and after being satisfied the assessment order came to be passed. Hence, it was not correct to say that the source of loans remained unexplained and the reopening was not permissible as it was only due to change of opinion. In the order dated 22nd December, 2021, disposing the objections, which is also impugned in the Petition, Respondent No.1 has conveniently remained silent on the Petitioner’s submission about queries being raised during the assessment proceedings and issuance of notices under Section 133(6) of the Act. In the Affidavit in Reply to the Petition, of course, Respondent No.1 has admitted that notices under Section 133(6) of the Act were issued and confirmation from loan providers were obtained during the assessment proceedings. 7. Having considered the Petition with the documents annexed thereto, Affidavit in Reply and having heard the Counsels, we are satisfied that re-opening proposed is purely based on change of opinion and the entire issue which is the subject matter of the reasons recorded has been raised during the assessment proceedings, response obtained from Petitioner and Petitioner’s Kanchan P Dhuri 4 / 6

921-WP-996-2022.odt explanation has been accepted by the Assessing Officer. Assessing Officer also, we would say , was satisfied with the credit worthiness and details provided by third party lenders. Mr. Sharma submitted that in the Assessment Order this issue has not been discussed. That does not help the cause of Respondents because it is settled law that once query has been raised and answers have been given, even if the assessment order is silent, the Assessing Officer is supposed to have considered the issue and is deemed to have been satisfied with the explanation offered by the assessee. Moreover, in this case, notice under Section 133(6) of the Act has also been issued to third party lenders who have, as admitted in the Affidavit in reply , given confirmation about the transaction and credit worthiness. 8. In these circumstances, we will have to note that notice issued under Section 148 of the Act dated 31 st March, 2021 impugned in this Petition has to be set aside and consequently Order dated 22 nd December, 2021 also has to go. Ordered accordingly . 9. Before we part, we have to note that there is an incorrect statement made in the Affidavit-in-reply . In paragraph 7 of Affidavit in Reply , it is stated that during the assessment proceedings, confirmation from the loan providers was obtained under Section 133(6) of the Act. But in paragraph 11 of the Affidavit, it is stated that “the credit worthiness of the creditor and Kanchan P Dhuri 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

921-WP-996-2022.odt genuineness of the transaction have not been explained” . In our view, this averment in paragraph 11 is an incorrect statement because during the assessment proceedings notice under Section 133(6) has been issued and confirmation has been received from the lenders with documents and the Assessing Officer was satisfied. Morever, if the confirmation alongwith credit worthiness and genuineness of transaction even if we assume have not been explained, certainly it would have been mentioned in the assessment order. We have to also note that in the Petition, there is an averment in paragraph 5(a) about how the loan was obtained, details of loan confirmation filed, independent inquiry made under Section 133(6) of the Act etc., none of which has been denied in the Affidavit in Reply . Therefore, we observe that statement in the Affidavit in Reply that the credit worthiness of the creditor and genuineness of transaction have not been explained is incorrect. Purely by way of indulgence, we are not issuing any notice for perjury against the officer who has filed the Affidavit in reply . 10. Petition disposed. 11. At the request of Mr. Sharma we are not imposing costs on the concerned Assessing Officer. ( N.R. BORKAR, J. ) ( K.R. SHRIRAM, J. ) Kanchan P Dhuri 6 / 6

Operative decision and relief

The operative relief must be read from the final paragraphs of the complete packaged judgment.

Ratio and legal principle

The narrow proposition associated with Vapi Infrastructure and Industrial Township LLP v ITO concerns section 147 – reopening – lenders had shown very less income in the itr – held reopening is bad on account of change of opinion – high court shows indulgence towards ao, refrains from issuing notice for perjury and imposing costs for making wrong statement in reply. reopening was done beyond fours years on the ground that eight parties who had lent rs rs.27,87,70,259/- to assessee had shown very less income in itr’s. it was held that during the course of original assessment proceedings ao had verified and satisfied himself about the identity, creditworthiness and genuineness of lenders and had also issued notices u/s 133(6) to the lenders and thus reopening was bad in law due to change of opinion. it was also observed that statement in the affidavit in reply that the credit worthiness of the creditor and genuineness of transaction have not been explained is 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. 996 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 – Lenders had shown very less income in the ITR – Held reopening is bad on account of change of opinion – High Court shows indulgence towards AO, refrains from issuing notice for perjury and imposing costs for making wrong statement in reply. Reopening was done beyond fours years on the ground that eight parties who had lent Rs Rs.27,87,70,259/- to Assessee had shown very less income in ITR’s. It was held that during the course of original Assessment Proceedings AO had verified and satisfied himself about the identity, creditworthiness and genuineness of lenders and had also issued Notices u/s 133(6) to the lenders and thus reopening was bad in law due to change of opinion. It was also observed that statement in the Affidavit in Reply that the credit worthiness of the creditor and genuineness of transaction have not been explained is Its practical value lies in the way the Bombay High Court connected the governing provisions—147; 143(3); 133(6).—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; 143(3); 133(6). and the decision date 2022-04-19; 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 Vapi Infrastructure and Industrial Township LLP v ITO, the proceeding is WRIT PETITION NO. 996 OF 2022, and the decision is dated 2022-04-19. 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 AND 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 147; 143(3); 133(6).. 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.
• 143(3) — apply the exact version considered in the judgment.
• 133(6). — 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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