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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
N.V. ANJARIA, BHARGAV D. KARIA, JJ.
GUJARAT NATURAL RESOURCES LIMITED – Petitioner
Versus
ASSISTANT COMMISSIONER OF INCOME TAX – Respondent
Special Civil Application No. 18613 of 2018
Decided On : 11-11-2022
Income Tax Act - Reopening of Assessment - Section 148 - 143(3) - 142(1) - 147 - 226 - [The court discussed the provisions of the Income Tax Act, 1961, specifically sections 143(3), 142(1), 147, and 226 in the context of the challenge against the notice dated 26.3.2018 issued by the Assessing Officer to the petitioner company seeking to re-open the assessment for the Assessment Year 2011-2012.]
Fact of the Case:
The petitioner, a limited company, filed its return of income for the assessment year 2011-2012 and subsequently received a notice under section 148 of the Income Tax Act, 1961 seeking to re-open the assessment. The petitioner objected to the re-opening, stating that all material facts were disclosed during the original assessment proceedings.
Finding of the Court:
The court found that the petitioner had fully and truly disclosed all material facts necessary for assessment during the original assessment proceedings. The court held that the re-opening of the assessment was based on a change of opinion by the Assessing Officer, which was impermissible in law.
Issues: The issues included the validity of the notice for reassessment, the requirement of disclosing material facts, and the permissibility of re-opening the assessment based on a change of opinion.
Ratio Decidendi: The court held that the Assessing Officer cannot exercise powers to re-open a concluded assessment based on a mere change of opinion. The duty of the assessee is to disclose necessary facts, and the Assessing Officer's duty is to apply those facts in accordance with legal provisions of assessment.
Final Decision: The court set aside the notice seeking to re-open the assessment and the order rejecting the objections of the assessee, ruling in favor of the petitioner.
JUDGMENT :
N.V. ANJARIA, J.
1. Heard learned advocate Mr. Manish Shah for the petitioner and learned senior advocate Mr. M.R. Bhatt for M.R. Bhatt and Co. for the respondent, at length.
2. The challenge in this Special Civil Application filed under Article 226 of the Constitution is directed against notice dated 26.3.2018 issued by the Assessing Officer to the petitioner company under section 148 of the Income Tax Act, 1961 for the Assessment Year 2011-2012 seeking to re-open the assessment. It is stated in the notice that the Assessing Officer had reasons to believe that income chargeable to tax for the year under consideration had escaped assessment within the meaning of section 147 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). The further prayer is to set aside order dated 5.10.2018 passed by the Assessing Officer whereby the objections raised by the petitioner to the re-opening of the assessment came to be disposed of and rejected.
3. Noticing the attendant facts, the petitioner, a limited company, engaged in the business of trading in oil products, filed its return of income for the assessment year 2011-2012 on 30.09.2011 declaring total income of Rs. 5,02,820/-. The Assessing Officer issued notice under section 143(2) dated 2.8.2012 and thereafter noticed under section 142(1) dated 1.7.2013 placing certain questionnaires, to which the petitioner submitted reply furnishing details and information by its letter dated 10.7.2013. The assessment order under section 143(3) came to be passed on 28.2.2014.
3.1 It was thereafter that the petitioner received notice dated 26.3.2018 under section 148 of the Act. The petitioner filed its response and requested the Assessing Officer to supply reasons recorded for reopening of the assessment. The reasons were provided by letter dated 23.8.2018. The petitioner submitted its detailed objections by communication dated 26.9.2018. The Assessing Officer passed order disposing of the objections to reject the same on 5.10.2018.
3.2 In the communication dated 23.8.2018, whereby the reasons for re-opening were supplied to the petitioner, it was stated inter-alia that the office of the Assessing Officer had received information from the investigating wing by letter dated 19.3.2018 that the petitioner company had received large funds to the tune of Rs. 2.37 crores from different persons and entities. It was stated that upon analysing the details received, it was found that the petitioner company had received share application money from total eight persons during the financial year 2010-2011 relevant to Assessment Year 2011-2012. It was further stated that out of eight persons, four persons lacked creditworthiness and their whereabouts were not found.
3.3 The details regarding the said four persons/entities were mentioned thus, (i) From Milan Grafitech Pvt. Ltd. the petitioner company had received Rs. 2,62,50,000/- towards share application money and though summons was issued, information was not furnished in that regard by the petitioner, (ii) similarly Rs. 52,50,000/- was the amount of share application money received by the petitioner from one Ardent Ventures Pvt. Ltd. In this case, it was stated the summons was not served as the house was locked and the neighbors had no idea about the company and that there was no name plate of the company in the building, (iii) from one Shivance Esatae Pvt. Ltd. an amount of Rs. 1,31,25,000/- was stated to have been received towards the share application money. It was stated in this regard that creditworthiness of this entity was not found satisfactory from the return of income furnished by the petitioner in the year under consideration, (iv) an amount of Rs. 4,29,625/- received by the petitioner towards share application money from one Infinium Natural Resources Investment Pvt. Ltd. but the source of amount invested was required to be verified.
3.4 The Assessing Officer further stated that he searched in the assessment records from the various
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