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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
Bhargav D. Karia, D.N.Ray, JJ.
Raajratna Stockholdings Pvt. Ltd. - Appellant
Vs.
Assistant Commissioner Of Income Tax Circle 1(1)(1) - Respondent
Special Civil Application No. 3696 of 2022
Decided On : 25-11-2024
(A) Constitution of India - Article 226 - Income Tax Act, 1961 - Section 148 - Reopening of assessment - Notice for reopening challenged on grounds of lack of jurisdiction and absence of independent opinion - The court found that the Assessing Officer relied solely on external information without forming an independent belief about income escapement - Notice quashed. (Paras 4, 6.1, 10, 12)
(B) Jurisdiction - The necessity for the Assessing Officer to form an independent opinion based on material on record before issuing a notice for reopening assessment was emphasized, reinforcing the principle that mere reliance on external sources without verification is insufficient. (Paras 10, 11)
Facts of the case:
The petitioner challenged the reopening of assessment for A.Y. 2013-14, asserting that all material facts were disclosed. The notice was based on information from an insight portal indicating non-genuine profit generation.
Findings of Court:
The court determined that the reopening notice was issued without independent analysis or verification of the petitioner's disclosures, thus lacking jurisdiction.
Issues: The main issues included the legitimacy of the reopening notice and whether the Assessing Officer had formed an independent opinion regarding income escapement.
Ratio Decidendi: The court ruled that the Assessing Officer's reliance on external information without independent verification was inadequate to justify reopening the assessment.
Result: Petition allowed; notice quashed.
JUDGMENT :
Bhargav D. Karia, J.
1. Heard learned Senior Advocate Mr. Tushar Hemani with learned advocate Ms. Vaibhavi Parikh for the petitioner and learned Senior Standing Counsel Mr. Varun K.Patel for the respondent.
2. Having regard to the controversy arising in this appeal in narrow compass, with the consent of the learned advocates for the respective parties, the matter is taken up for hearing.
3. By this petition under Article 226 of the Constitution of India, the petitioner has challenged a notice dated 30.03.2021 for reopening of assessment for A.Y.2013-14 issued under section 148 of the Income Tax Act,1961 [for short ‘the Act’].
4. The petitioner-company was engaged in the activity of trading in shares and securities. During the Financial Year 2012-13 relevant to Assessment Year 2013- 14, the petitioner had also entered into transaction in Futures & Options [F & O] and derivatives, which resulted into profit of Rs. 1,52,59,143/-. The petitioner disclosed the same in the Profit and Loss Account and filed return of income for the year under consideration on 30.09.2013 declaring total income at Rs. (-)73,71,104/-. Case of the petitioner was selected for scrutiny and during original assessment proceedings, various details were called for which were duly furnished from time-to-time by the petitioner and the assessment order under section 143(3) of the Act was passed on 17.02.2016 accepting the returned income.
4.2 After analysis of the information and report of the Security Exchange Board of India as well as the decision of the Hon’ble Apex Court in case of SEBI vs. Rakhi Trading Private Limited delivered on 08.02.2018 in CA No. 1969 of 2011, the Assessing Officer formed a reason to believe that there is escapement of income by the petitioner in generating non-genuine profit amounting to Rs. 1,30,47,000/-.
4.3 The petitioner in response to the notice, filed the same return of income and requested for the reasons recorded and thereafter, raised the objections vide letter dated 12.07.2021 against the reopening of the assessment contending that the respondent has no jurisdiction to reopen the assessment as the petitioner has disclosed fully and truly all material facts relevant for the assessment.
4.4 It was also pointed out that the petitioner has disclosed the profit earned in the F&O and the derivatives transaction carried out during the relevant period and therefore, there is no question of escapement of any income. It was also contended that as the respondent-Assessing Officer has failed to form any independent opinion to come to the primafacie reason to believe that the income has escaped assessment.
4.5 The Respondent-Assessing Officer however, by order dated 25.11.2021, disposed of the objection holding that the reopening was justified. Being aggrieved, the petitioner has preferred this petition.
5. This Court, by order dated 02.09.2024, admitted the petition and granted interim relief confirming the ad interim relief which was granted earlier vide order dated 21.02.2022.
6. Learned Senior Advocate Mr. Turshar Hemani for the petitioner submitted that the reasons recorded for reopening are incorrect and unreliable as the same are based only upon the information without any nexus with the facts of the case and without independent application of mind on behalf of the respondent.
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.
The court emphasized that vague reasons for reopening an assessment do not satisfy the legal requirement for establishing income escapement under Section 148.
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 assessments under the Income Tax Act requires fresh tangible material; reliance on previously examined information constitutes a change of opinion and is invalid.
The Assessing Officer must establish the jurisdictional requirement for reopening and cannot rely solely on information without verifying if the issue had been disclosed during the original assessmen....
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....
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 under the Income Tax Act requires tangible new material; mere change of opinion is insufficient.
Reassessment under the Income Tax Act requires tangible evidence of income escaping assessment; mere suspicion is insufficient.
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