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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
BHARGAV D. KARIA, NIRAL R. MEHTA, JJ.
Adeshwara Cement Co. Pvt. Ltd. Through Director Kushal Mohit Shah – Appellant
Versus
Asst. Commissioner of income tax, Circle 1(1)(1), Or His Successor – Respondent
R/SPECIAL CIVIL APPLICATION NO. 3474 of 2022
Decided on : 23-07-2024
Reassessment - Income Tax - Section 143, 147, 148, 115JB - The court discussed the provisions regarding reopening of assessments under the Income Tax Act, emphasizing the necessity of tangible material for reassessment and the implications of income determined under Section 115JB.
Fact of the Case:
The petitioner, a closely held company, sought to quash a notice for reassessment of income for AY 2017-18, claiming the reopening was based on insufficient grounds and that the income had already been assessed under Section 115JB.
Finding of the Court:
The court found that the reassessment notice lacked tangible evidence linking the petitioner to the alleged non-genuine gains, and that even if the proposed addition was made, it would not affect the income already assessed under Section 115JB.
Issues: Whether the reassessment notice issued under Section 148 was valid given the lack of tangible material and the implications of the income assessed under Section 115JB.
Ratio Decidendi: The court held that reassessment requires tangible evidence of income escaping assessment, and if the income is already assessed under Section 115JB, further reassessment would serve no purpose.
Result: The petition was allowed, quashing the reassessment notice dated 30.03.2021.
ORDER :
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
1. Heard learned advocate Mr.S.N.Divatia for the petitioner and learned Senior Standing Counsel Mr.Varun K.Patel for the respondent no.1.
2. Rule returnable forthwith. Learned Senior Standing Counsel Mr.Varun K.Patel waives service of notice of rule on behalf of respondent no.1.
3. By this petition under Article 226 of the Constitution of India the petitioner has prayed for the following reliefs:
(b) to call for the records of the proceedings, look into them and be pleased to issue a writ of certiorari or any other appropriate writ, order or direction quashing the impugned notice as well as the order of objection dt. 10.11.2021 (Annex.-B).
(c) Pending the hearing and final disposal of this petition to maintain status quo in the matter and ask the Respondent and its subordinates not to take any action or to do anything in furtherance and pursuance of this impugned notice.
(d) To allow this Petition with cost.
(e) To pass any further or other orders as the Hon'ble Court may deem proper in the interest of justice and in the circumstances of the case.”
4. The brief facts of the case are as under:
4.1. The petitioner is a closely held company engaged in the business of trading of cement, steel and commission agent. For the Assessment Year 2017–18, the petitioner filed original return declaring total income of Rs. 52,08,790/- on 30.10.2017.
4.2. The return of income filed by the petitioner was subjected to limited scrutiny under Section 143(2) of the Income Tax Act, 1961 (for short “the Act”) dated 08.08.2018 followed by notice under Section 142(1) of the Act seeking information from the petitioner for various details documents etc. related to Short Term Capital Gains declared by the petitioner in the return of income.
4.3. The Assessing Officer completed regular assessment under Section 143(3) of the Act on 30.11.2019 after considering the explanation in detail furnished by the petitioner including the Short Term Capital Gains and Long Term Capital Gains transactions and assessed the income and determined the total income by making addition under Section 14(A) of the Act of Rs.3,54,514/- for Rs.55,63,304/-. The Assessing Officer however determined the books profit as per Section 115JB of the Act at Rs.2,04,69,726/- and adding disallowance of Rs.3,54,514/- assessed Book profit at Rs.2,08,24,240/-.
4.4. The respondent-Assessing Officer thereafter issued impugned notice under Section 148 of the Act for Assessment Year 2017-18 on 30.03.2021 proposing to reassess the total income on the ground that share price of Kushal Ltd. were rigged without supportive financials and fundamentals to provide bogus accommodation entry in the form of Long Term Capital Gains/ Short Term Capital Gains/ loss and thus the petitioner is indulged into non-genuine gain amounting to Rs.67,56,951/- which had escaped assessment.
4.5. In response to the impugned notice, the petitioner filed return of income on 14.04.2021 and sought the copy of the reasons recorded which were provided by the respondent Assessing Officer along with letter dated 19.05.2021. The reasons recorded which reads as under:
1. Brief facts of the case: The assessee filed its return of income for the A.Y.2017-18 on 30.10.2017 declaring total income at Rs.52,08,790/-. Assessment u/s. 143(3) was completed on 30.11.2019 by determining total income at Rs. 55,63,304 /-.
2. Brief details of information received:
Reassessment under the Income Tax Act requires tangible evidence of income escaping assessment; mere suspicion is insufficient.
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....
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 the Income Tax Act requires new material evidence; reliance on previously considered information is insufficient.
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....
Reopening of assessment beyond four years without fresh tangible material or proper disposal of objections is illegal under the Income Tax Act.
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....
Reopening of assessment under the Income Tax Act requires tangible material; mere change of opinion is insufficient for reassessment.
Assessing Officer having arrived at his subjective satisfaction based on additional fresh material placed before him that the petitioner had not fully and truly disclosed all the material facts neces....
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