IMPORTANT POINT
The court emphasized the necessity for the Assessing Officer to apply due diligence and consider all evidence before concluding that income has escaped assessment.

JUDGMENT :

Bhargav D. Karia, J.

1. Heard learned advocate Mr. S.N. Divatia for the petitioner and learned advocate Mr. Karan Sanghani for learned advocate Ms. Kalpana K. Raval for the respondent.

2. Having regard to the issue involved in this petition which is in a very narrow compass, with the consent of the learned advocates for the respective parties, the matter is taken up for hearing.

3. Rule returnable forthwith. Learned advocate Mr. Karan Sanghani waives services of notice of rule on behalf of the respondent.

4. By this petition under Article 226 of the Constitution of India, the petitioner has prayed for quashing and setting aside the order dated 29.03.2024 passed under section 148A(d) of the Income Tax Act, 1961 (For short “the Act”) for Assessment Year 2018-2019 as well as notice under section 148 of the Act issued on 29.03.2024 for AY 2018-2019.

5. Brief facts of the case are that the petitioner is a partnership firm which was constituted as per the partnership deed executed on 01.04.2017 to carry on the business of trading of cotton yarn and spare parts of textiles machinery related products.

6. The petitioner filed its e-ITR for Assessment Year 2018-2019 on 17.07.2018 declaring total income of Rs.8,64,480/-.

7. Respondent issued notice under section 148A(b) on 23.02.2024 calling upon the petitioner to show cause as to why the notice under section 148 of the Act should not be issued and was further asked to furnish response on or before 04.03.2024. The reasons given by the respondent Assessing Officer to come to the conclusion that it is a fit case to reopen the assessment as under :

“4. In response to the above, the assessee furnished the response on 04/03/2024 along with the details. The submission of the assessee has been duly considered. The assessee has filed the return of income for the year under consideration on 17-07-2018 declaring total Income of Rs.8,64,483/- and is engaged in business of trading of Cotton Yarn and related products and furnished the computation of income, Audit report.

(i) In respect to payment to contractors M/s. A S Yarn Tex Pvt. Ltd, the assessee has stated that M/s. A S Yarn Tex Pvt. Ltd has wrongly shown the transaction in the TDS return and the said amount does not relate to the assessee. The assessee has furnished the ledger as well as the said transaction pertains to Star Roadways as per the clarificatory letter from M/s. A S Yarn Tex Pvt. Ltd.

(ii) In response to information regarding brokerage from M/s. Rimtex Industries of Rs.12,13,400/- the said commission income is already shown in books of accounts and submitted the ledger showing such details.

(iii) Further as per the GSTR data the assessee has made sale of Rs.59,80,84,806/- during the year under consideration and in this regard, the assessee furnished the sum of party wise sales figures as per GSTR data. However, the assessee has not furnished the sales register of the period under consideration. Hence, the income corresponding to the sale transaction of Rs.59,80,84,806/- being represented in the form of assets as defined in explanation to Section 149 of the Act has escaped assessment.

(iv) As per the information in GSTR data the assessee has made purchases of Rs.66,22,73,034/- during the year under consideration. In this regard, the assessee has furnished the sum of party wise purchase data of the period under consideration. The assessee has not furnished the purchase register and therefore, the source of purchases of Rs.66,33,73,034/- being represented in the form of assets as defined in explanation to Section 149 of the Act has escaped assessment.

(v) In respect to the sale of Mutual Funds of Rs. 8,17,919/- the assessee has furnished the Excel sheet of the sale of Mutual funds and stated that sale has been made by the partners and during the year assessee firm has not sold any mutual funds.

(vi) In respect to Transaction of Rs.9,71,156/- with Mittal Enterprise the assessee has stated that the same are duly recorded in the books. The