Back
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
BHARGAV D. KARIA, NIRAL R. MEHTA, JJ.
Deepak Natvarlal Pankhiyani (HUF) – Appellant
Versus
Assistant Commissioner Of Income Tax Circle 3(1)(1) & Anr. – Respondent
R/Special Civil Application No. 2870 of 2022
Decided on : 14-06-2024
Income Tax - Quashing of Notice - Income Tax Act, 1961 - Sections 147, 148, 143(2), 68 - The court interpreted the provisions regarding reopening of assessments, emphasizing the necessity of fresh tangible material for valid reassessment, ultimately quashing the notice for lack of jurisdiction.
Fact of the Case:
The petitioner, engaged in trading shares, challenged a notice under section 148 of the Income Tax Act for reopening an assessment for AY 2015-16, claiming all material facts were disclosed during the original assessment.
Finding of the Court:
The court found that the petitioner had disclosed all relevant information during the original assessment, and the reopening notice was based on a mere change of opinion without fresh evidence.
Issues: Whether the notice issued under section 148 for reopening the assessment was valid given the circumstances and the information available at the time of the original assessment.
Ratio Decidendi: The court held that reopening assessments requires fresh tangible material indicating income has escaped assessment, and reliance on previously examined information constitutes a change of opinion, rendering the notice invalid.
Result: The notice under section 148 and the order rejecting objections were quashed and set aside.
JUDGMENT :
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
1. Heard learned advocate Mr. B.S.Soparkar for the petitioner and learned Senior Standing Counsel Mr. Karan Sanghani for learned advocate Mrs. Kalpana K Raval for the respondent.
2. Rule returnable forthwith. Learned Senior Standing Counsel Mr. Karan Sanghani waives service of notice of rule for the respondents.
3. Having regard to the controversy in the narrow compass, with the consent of the learned advocates for the parties, the matter is taken up for hearing.
4. By this petition under Article 226 of the Constitution of India, the petitioner has prayed for quashing and setting aside the notice dated 27.03.2021 issued under section 148 of the Income Tax Act,1961 [for short ‘the Act’] as well as the impugned order dated 10.01.2022 rejecting the objection filed by the petitioner.
5. Brief facts as stated in the memo of the application are as under:
5.1 The petitioner is engaged in the business of trading in shares and security. The petitioner filed its original return of income for AY 2015-16 on 21.09.2015 declaring total loss of Rs. 2,00,23,842/-.
5.2 The case of the petitioner was selected for limited scrutiny by issuing notice u/s. 143(2) dated 20.09.2016 where on of the specific reasons for selection of case for scrutiny was “Derivative (Future) transactions” and in response to the same, the petitioner filed a reply dated 26.09.2016 submitting all the details regarding such derivatives transactions. Thereafter, notice u/s. 142(1) issued which were replied to by the petitioner from time to time. Vide notices dated 04.08.2017 and 19.09.2017, specific questions relating to the trading in future in a recognized stock exchange was raised. Details regarding the same were provided vide letter dated 29.08.2017 and 22.09.2017. Thereafter, the assessment u/s. 143(3) was framed on 30.12.2017 at Rs. 1,11,49,610/-.
5.3 The petitioner filed an application for rectification on 24.01.2018. Thereafter, order u/s. 154 dated 01.02.2018 was passed accepting the error and rectifying the same.
5.4 An appeal was also filed by the petitioner challenging the said assessment order and the appeal of the petitioner was partly allowed vide order dated 30.08.2018.
5.5 The respondent no.1 thereafter issued the impugned notice under section 148 of the Act dated 27.03.2021 asking the petitioner to file return of income for the Assessment Year 2015-16. The petitioner without prejudice filed its return of income and sought for the reasons recorded for reopening. The petitioner was thereafter provided with the notice u/s. 143(2) recording issues as per reasons recorded for reopening on 24.05.2021.
5.6 Thereafter, the petitioner filed the objections on 22.07.2021 challenging the validity of the notice issued u/s. 148 of the Act. The respondent No.2 has disposed of the objections of the petitioner on 10.01.2022. Hence, the petitioner preferred this petition challenging the notice dated 27.03.2021 issued u/s. 148 of the Act and the order disposing of the objections raised dated 10.01.2022.
6. Learned advocate Mr. Soparkar for the petitioner submitted that the impugned notice and the order passed by the respondent No.1 are based upon only one reason to believe that income has escaped assessment regarding profit of Rs. 5,66,96,530/- earned by the petitioner by carrying out trading in shares treating the same as unexplained credit under section 68 of the Act.
6.1 It was submitted that the impugned notice for Assessment Year 2015- 16 is beyond the period four years and learned advocate Mr. Soparkar referred to the notice dated 20.09.2016 issued under section 143(2) of the Act wherein the details of the derivatives (future transactions) were called for by the Assessing Officer which was replied by the petitioner by reply dated 26.09.2016 disclosing that the petitioner has entered into various derivatives (future transactions) during the year for which ledger accounts and contract notice were provided. It was further submi
Reopening of assessments under the Income Tax Act requires fresh tangible material; reliance on previously examined information constitutes a change of opinion and is invalid.
The court emphasized that vague reasons for reopening an assessment do not satisfy the legal requirement for establishing income escapement under Section 148.
The court held that an Assessing Officer must form an independent opinion based on material on record before reopening an assessment, and cannot solely rely on external information.
Reopening of assessment under section 148 requires new tangible material; reliance on previously considered facts constitutes a change of opinion, which is impermissible.
The main legal point established is that the Assessing Officer's belief for the reassessment of income under section 148 of the Income Tax Act is based on subjective satisfaction and the existence of....
The reopening of an assessment under the Income Tax Act requires the Assessing Officer to provide specific reasons linking alleged income escapement to the taxpayer's records, which must not solely r....
Reopening of income tax assessments requires new tangible material; mere change of opinion is insufficient.
Reopening of assessment requires fresh material linking the taxpayer's transactions to the alleged income escapement, which was not established in this case.
Point of law: It is no doubt true that the Court cannot go into the sufficiency or adequacy of the material and substitute its own opinion for that of the Income Tax Officer on the point as to whethe....
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
