ASHISH BOHRA V. INCOME TAX OFFICER WARD 2(3)(7)

SCA/22188/2019

AI Insights

The case involves Ashish Bohra, the writ applicant, who challenged a notice issued under Section 148 of the Income Tax Act, 1961, for the Assessment Year 2012-13. The notice was issued by the Income Tax Officer, Ward 2(3)(7), alleging unexplained credit entries in the applicant's bank account amounting to Rs.48,18,90,367. The applicant contested the notice and the subsequent order disposing of his objections, arguing that the AO had mechanically disposed of the objections without proper consideration. The court agreed with the applicant, noting that the AO failed to address the objections adequately and did not provide a speaking order as required by law.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 749759 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 11-05-2021
• Assessment Year: misc
• Other Referred Cases: GKN Driveshafts (India) Ltd. vs. ITO, SABH Infrastructure Ltd Vs. ACIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: KALPANA RAVAL
• Assessee Lawyers: OMKAR DAVE
• Keywords: Income Tax; Jurisdiction; Mechanical disposal; Reassessment; Unexplained credit entries
• Section: 147; 148; 143(3)

Judgement Text

"C/SCA/22188/2019 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 22188 of 2019 ========================================================== ASHISH BOHRA Versus INCOME TAX OFFICER WARD 2(3)(7) ========================================================== Appearance: MR OMKAR C DAVE(2003) for the Petitioner(s) No. 1 MRS KALPANAK RAVAL(1046) for the Respondent(s) No. 1 ========================================================== CORAM: HONOURABLE MR. JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE ILESH J. VORA Date : 11/05/2021 ORAL ORDER (PER : HONOURABLE MR. JUSTICE ILESH J. VORA) 1. By filing this petition under Article 226 of the Constitution of India, the writ applicant being an Individual Assessee has challenged the Notice dated 30.03.2019 issued under Section 148 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’ for short), in respect of Assessment Year 2012-13 by the Assessing Officer, on the ground that same is illegal, without jurisdiction, as prescribed under the Act. 2. Briefly stated the facts of the case are that the writ applicant being an Individual Assessee filed his return of income on 29.06.2012, declaring the total income at Rs.4,16,300/-. On 12.03.2015, the assessment was framed under Section 143(3) of the Act. During the assessment proceedings various details were called for by the AO including the details pertaining to the bank entries and various transactions made during the year under consideration. The writ Page 1 of 8 C/SCA/22188/2019 ORDER applicant vide letter dated 01.08.2014 and 22.12.2014 had furnished various details like bank particulars, bank statements, purchase and sales ledgers, etc. The AO after considering the details furnished by the writ applicant, framed the assessment under Section 143(3) of the Act, determined the total income at Rs.4,82,482/-, making addition of Rs.66,182/-. 3. Thereafter, the AO issued impugned notice under Section 148 of the Act for reopening of the assessment for the year 2012-13. In response to the notice, the writ applicant filed his return of income and asked to provide reasons recorded for the reassessment. The revenue vide its communication dated 25.06.2019 furnished the reasons recorded, which reads as under:- Reasons for reopening :- “2.xxx. To verify the contents of the same credit entries, summons was issued to assessee, but assessee had not complied with the summons. Therefore, same credit entry remained unavailable/unexplained in the hands of the assessee. 3. Analysis of the information collected/received: On verification of information received, it is noticed that credit entries amounting to Rs.48,18,90,367/- are unexplained in the hands of the assessee. It is thus, observed that the assessee is engaged in bogus sale purchase. Further assessee has not shown its true income for the year under consideration. 4. Analysis of information collected/received & Enquiries made by the AO as sequel to information collected/received. Information has been analysed and consciously considered. The database of this office/records available has also been perused. At the same time, the information so received is also found to be from a reliable source, specific and directly relevant to assessee's case., It becomes to surface that impugned assessee have made the credit entries of Rs.48,18,90,637/- in his bank account no.550011038370 which are unexplained in view of such specific and pointing discovery of investigation, there is a clear case of escapement of income in the hands of the assessee. Further, during the course of assessment proceedings, Page 2 of 8 C/SCA/22188/2019 ORDER assessee has not submitted the facts of above mentioned credit entries made during year. Further, assessee has not shown its true income for the year. 5 & 6 : Findings of AO & Basis of forming reason to believe and details of escapement of income:- In this case, specific information was received from investigation wing, Surat that assessee had credit entries to the tune of Rs.48,18,90,367/- in his bank account. Further, summons was also issued to the assessee to ascertain genuineness of the said credit entries. However, the assessee failed to make compliance of the summons. The non-compliance of the summons on the part of the assessee clearly indicates that the assessee has no plausible explanation with regard to such huge entries in his bank account and therefore these credit entries are unexplained. On careful perusal of the return of income filed by the assessee for A.Y. 2012-13, it is noticed that the credit entries in bank account to the tune of Rs.48,18,90,367/- has not been offered. Further, assessee has not submitted the explanation regarding above mentioned credits before authority even though ample opportunity given. It can be inferred from this that the credit entries in the said account is to the tune of Rs.48,18,90,367/- are nothing but the income of the assessee which has not been offered by the assessee for taxation during the year under consideration. Therefore, I have reason to believe that the income of Rs.48,18,90,367/- chargeable to tax has escaped assessment for the A.Y. 2012-13 by reason of failure on the part of the A.Y. 2012-13 and it is a fit case to reopen u/s. 147 of the Act...... 8. Escapement of Income:- In view of the above facts, it is established that the assessee has not disclosed the correct and full material facts for the year under consideration and hence, I have reason to believe that credit entries of Rs.48,18,90,367/- chargeable to tax has escaped asseessment because of non disclosure of material facts necessary for assessment for A.Y. 2012-13 within the meaning of Section 147 of the Act for A.Y. 2012-13. 9. …...It is true that the assessee has filed a copy of audited P&L account and balance-sheet along with return of income where various information / material were disclosed. However, the requisite full and true disclosure of all material facts necessary for assessment has not been made as noted above. It is pertinent to mention here that even though the assessee has furnished annual report, audited P&L account and balance-sheet or other evidence, however, the requisite material facts as noted above in reasons for reopening that material evidence could not be discovered by AO and could have been discovered with due diligence, accordingly, attracting provisions of explanation (1) of Section 147 of the I.T. Act..............” 4. The writ applicant raised various objections vide communication dated 27.09.2019, both on the ground of jurisdiction as well as on Page 3 of 8 C/SCA/22188/2019 ORDER merits and requested the respondent to drop the reassessment proceedings. Same came to be rejected by the respondent vide order dated 18.11.2019, holding that the assessment is valid and within jurisdiction. 5. Being aggrieved by the impugned notice as well as the order disposing of the objections, the writ applicant came up with present writ application. 6. We have heard the learned Senior Advocate Mr. Sunit Shah, assisted by Mr. Omkar Dave, the learned advocate appearing for the writ applicant and Mrs. Kalpana Raval, the learned Standing Counsel assisted by Mr. Nikunt Raval, the learned advocate appearing for the revenue. 7. Mr. Sunit Shah, the learned Senior Advocate has raised various contentions as mentioned in the petition. Referring to the reasons recorded and order disposing the objections raised by the writ applicant, it was contended that the AO had mechanically disposed of the preliminary objections. Relying on the decision of GKN Driveshafts (India) Ltd, (2003) 259 ITR 19, it was submitted that the AO should have dealt with each objection and should have assigned cogent reasons for its conclusion, by passing a speaking order. In this context, it was submitted that in the case on hand, although various objections were raised against the impugned notice, yet the AO failed to take note of the objections and mechanically disposed of the same without assigning the reasons on the issues. Therefore, it was submitted that the impugned notice as well as the Page 4 of 8 C/SCA/22188/2019 ORDER order disposing the objections are required to be set aside. 8. Mr. Sunit Shah, the learned Senior counsel relying upon the case of SABH Infrastructure Ltd Vs. ACIT, (2018) 99 Taxmann.com 409 (Delhi), further contended that there is a clear violation of the directions issued by the Delhi High Court. It was submitted that at the time of providing the reasons recorded for the reassessment, the respondent failed to provide the necessary approval accorded by the Competent Authority and other documents which may form the basis of reasons and enquiry conducted by the AO. 9. It was submitted by the learned counsel Mr. Sunit Shah for the writ applicant that in the previous assessment proceedings, the writ applicant had furnished all the details and based on the details provided, the AO had framed the assessment order under Section 143(3) of the Act, and now on the same material, the AO sought to reopen the assessment which is nothing but a change of opinion and therefore, mere change of opinion, the reopening of concluded assessment is not permissible in law. 10. It was submitted by the learned counsel for the writ applicant that the impugned notice has been issued on 30.03.2019 in relation to AY 2012-13, which clearly beyond the period of 4 years from the end of the relevant assessment year and as such in absence of any failure on the part of the applicant to disclose fully and truly all material facts, the assumption of jurisdiction by the AO under Section 147 of the Act is invalid. Page 5 of 8 C/SCA/22188/2019 ORDER 11. On the other hand, learned Senior Standing Counsel Mrs. Kalpana Raval appearing for the revenue, reiterating the stand adopted by the revenue in affidavit in reply as well as in the order of disposing of the objections, submitted that the action taken by the AO is just, legal and proper and does not warrant any interference. It was further submitted that the AO has assigned cogent and sound reasons while disposing the preliminary objections filed by the writ applicant. It was further submitted that the impugned notice has been rightly issued by invoking Section 147 of the Act as writ applicant failed to disclose the truly and fully material facts with regard to credit entries as referred by the AO in the reasons recorded for the reassessment. It was submitted that the principle of change of opinion would not be applicable in the present case as the information received after framing of the assessment order which clearly shows that the assessee failed to disclose the material, which is incorrect and was not available at the time of previous assessment proceedings. 12. Having heard the learned counsel appearing for the respective parties and having gone through the materials on record, we are of the view that the AO while disposing off the preliminary objections filed by the writ applicant against the reasons recorded for reassessment, has not properly dealt with the objections. In the case of GKN Driveshaft (supra), the Supreme Court has laid down the procedure as to the manner of dealing with the objections raised against the notice under Section 148 of the Act. The Supreme Court has held that when a notice under Section 148 of the Act is issued, the proper course of action for the noticee is to file return and if he so desires, to seek reasons for issuing notice. It was further held that the AO is bound to furnish reasons within a reasonable time and Page 6 of 8 C/SCA/22188/2019 ORDER upon receipt of reasons, the noticee is entitled to file an objection to issuance of notice and AO is bound to dispose of the same by speaking order. In the case of SABH Infrastructure Ltd (supra), the Delhi High Court, has held that the exercise of considering the assessee’s objections to the reopening of the assessment is not a mechanical ritual. It is a quasi judicial function. The order disposing of the objection should deal with each objection and give proper reason for conclusion. The order should reflect proper application of mind. 13. Applying the dictum as laid down by the Supreme Court in the case of GVK Driveshaft (supra), we are of the view that disposing of the objections raised by the assessee against the reasons recorded before issuance of notice under Section 148 of the Act, though not part of the statutory requirement, as prescribed under the Act, however, same is guided by the directions issued by the Apex Court. The specific objections raised by the writ applicant, produced on record at page-33 to 45 to this writ application, have not been properly dealt with by the AO. The lapse is in clear violation of the decision of the Apex Court. We are of the view that the AO has passed the order mechanically and without application of his mind. In other words not in a meaningful manner. 14. In view of the above, this writ application succeeds in part. The order disposing of the objections filed by the assessee dated 18.11.2019 at Annexure – A, page-18 to this petition is hereby set aside and the matter is remitted to the AO. The AO shall take into consideration the objections raised by the assessee and pass a fresh Page 7 of 8 C/SCA/22188/2019 ORDER speaking order in accordance with law. 15. Let this exercise be undertaken within a period of six weeks from the date of the receipt of this order. We may clarify that we have otherwise not expressed any opinion on the merits of the case and we should otherwise also not do so as we are remitting the matter to the AO. In the event, if the order that the AO may pass a fresh, is adverse in any manner to the assessee, then, it shall be open for him to challenge the same before the appropriate forum in accordance with law. However, in the event, if the order is adverse, then at-least a period of 04 weeks shall be granted to the assessee to take recourse of the remedy available to him in law. (J. B. PARDIWALA, J) (ILESH J. VORA,J) P.S. JOSHI Page 8 of 8 "