EASY PAY PVT. LTD. V. DY. COMMISSIONER OF INCOME TAX CIRCLE 2(1)(1)

SCA/14401/2021

AI Insights

The case involves Easy Pay Pvt. Ltd., which challenged the notices and orders issued by the Deputy Commissioner of Income Tax, Circle 2(1)(1), under various sections of the Income Tax Act, 1961, for the assessment year 2017-2018. The petitioner argued that the reopening of the assessment was merely a change of opinion by the Assessing Officer, as the issue of cash deposits during the demonetisation period had been previously addressed in the regular assessment. The respondent countered that the Assessing Officer had tangible material indicating that income had escaped assessment, justifying the reopening. The court examined the submissions and found that the reopening was not justified, leading to the quashing of the notices and orders.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 767748 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 14-06-2022
• Assessment Year: misc
• Other Referred Cases: Gujarat Power Corporation Ltd. v. Assistant Commissioner of Income-Tax, Swati Malove Divetia V. Income Tax Officer
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: MANISH BHATT
• Assessee Lawyers: KETAN SHAH; AMAN SHAH
• Keywords: Cash deposit; Demonetisation; Income escaped assessment; Reopening of assessment; Writ of Certiorari; Writ of Mandamus
• Section: 147; 148; 143(3); 142(1); 143(2); 69A; 131(1A)

Judgement Text

"C/SCA/14401/2021 JUDGMENT DATED: 14/06/2022 IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 14401 of 2021 With CIVIL APPLICATION (FOR ORDERS) NO. 1 of 2022 In R/SPECIAL CIVIL APPLICATION NO. 14401 of 2021 FOR APPROVAL AND SIGNATURE: HONOURABLE MR. JUSTICE A.J.DESAI and HONOURABLE MR. JUSTICE BHARGAV D. KARIA ========================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ? ========================================================== EASY PAY PVT. LTD. Versus DY. COMMISSIONER OF INCOME TAX CIRCLE 2(1)(1) ========================================================== Appearance: MR KETAN H SHAH(2705) for the Petitioner(s) No. 1 MR. AMAN K SHAH(9992) for the Petitioner(s) No. 1 MR MANISH BHATT, SENIOR ADVOCATE FOR M R BHATT & CO.(5953) for the Respondent(s) No. 1 ========================================================== CORAM:HONOURABLE MR. JUSTICE A.J.DESAI and HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 14/06/2022 ORAL JUDGMENT Page 1 of 12 C/SCA/14401/2021 JUDGMENT DATED: 14/06/2022 (PER : HONOURABLE MR. JUSTICE A.J.DESAI) 1. Rule. Learned advocate Mr. Munjal Bhatt waives service of notice of rule on behalf of respondent. 2. With consent of learned advocates appearing for the respective parties, the matter is taken up for final hearing. 3. In this petition filed under Article 226 of the Constitution of India, the petitioner has prayed as under: “11. The petitioner, therefore, pray that this Hon’ble Court be pleased to issue writ of mandamus or a writ in the nature of mandamus or a writ of certiorari or a writ in a nature of certiorari or any other appropriate writ, direction or order and be pleased to (a) Quashed and set aside the impugned notices / order as appeared at Annexure ‘F’, Annexure ‘G’ and Annexure ‘I’. (b) Pending the admission hearing and final disposal of this petition, to stay the implementation and operation of the notices / orders as mentioned in para (a) herein above. And stay the furthers proceedings for the AY 2017- 18. (c) Any other and further relief deemed just and proper be granted in the interest of justice. Page 2 of 12 C/SCA/14401/2021 JUDGMENT DATED: 14/06/2022 (d) To provide for the cost of this petition.” 4. The challenge made in this petition is against notice dated 30.03.2021 (Annexure–F) issued by the respondent authority under Section 148 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act, 1961’ for short) and notice dated 20.05.2021 (Annexure-G) issued by the respondent authority under Section 143(2) read with Section 147 of the Act, 1961 as well as order dated 12.08.2021 (Annexure-I) passed by the respondent, by which, the objections raised by the petitioner for reopening the assessment for the assessment year 2017-2018, have been rejected. 5. In response to the notice issued by this Court, the respondent authority has filed the affidavit-in-reply dated 21.01.2022 and has opposed this petition. 6. The brief facts of the case are as under: 6.1) The petitioner, a private limited company, filed its return of income for the assessment year 2017-2018 originally on 30.10.2017 declaring total loss of Rs. 2,00,64,800/-. 6.2) Summons under section 131(1A) of the Act, 1961 dated 23rd January, 2018 was issued by Page 3 of 12 C/SCA/14401/2021 JUDGMENT DATED: 14/06/2022 DDIT (Inv.) Unit-1(2), Ahmedabad calling upon the petitioner to submit details of cash deposited during the financial year 2015-2016 and financial year 2016-2017 in the required format. 6.3) The petitioner submitted various charts showing cash deposit in the bank account of the petitioner during the financial years 2015-2016 and 2016-2017. 6.4) Thereafter the petitioner received notice dated 3rd September, 2019 under section 142(1) of the Act, 1961 for providing various information. As per paragraph no.20 of the said notice, detailed explanation was asked regarding cash deposited during the demonitisation period and as per paragraph no.22, the Assessing Officer called for detailed explanation in reference to cash deposited in the bank accounts along with point no. 26 to explain the cash on hand as on 8th November, 2016 i.e. the date of demonitisation which was subsequently deposited in the bank by the petitioner. The petitioner was also asked to provide the bank statement for the period from 08.11.2016 to 31.12.2016. 6.5) The petitioner submitted reply dated 12.11.2019 with regard to queries raised by the Assessing Officer. Page 4 of 12 C/SCA/14401/2021 JUDGMENT DATED: 14/06/2022 6.6) The Assessing Officer passed the order under section 143(3) on 20.11.2019 after considering the details provided by the petitioner pursuant to the summons under section 131(1A) as well as during the course of assessment proceedings. 6.7) The Assessing Officer thereafter issued notice dated 30.03.2021 under section 148 of the Act, 1961 for the assessment year 2017-2018. 6.8) The petitioner on receipt of the said notice requested for reasons recorded which were supplied vide letter dated 20.05.2021. The reasons recorded by the Assessing Officer are as under : “2. While acknowledging the case and diligence you have taken in preparing the return, there are certain issues as mentioned below, which need further clarification:- Issues as per reasons recorded for reopening As per the information received from the credible source that the assessee company has deposited case of Rs.1,46,42,000/- during the demontization period (i.e. from 09.11.2016 to 31.11.2016) in it bank account. It is further worth to mention that, on going through the information available in Insight Portal, it is seen that during the inquiry, the assessee company has stated that it has received payment of various services. That case was received at various outlets against the bills payments and the same was thereafter Page 5 of 12 C/SCA/14401/2021 JUDGMENT DATED: 14/06/2022 transferred to the respective service providers. The assessee company earns commission income against the service provided. In these circumstances, deep investigation is required in this case. The assessee found to be the owner of the money appearing in bank account(s). Further, the nature and source of such deposits made in the bank accounts were not at all explained. On perusal of information so received from Investigation Wing, Ahmedabad. It is noticed that the assessee company Easy Pay Private Limited (AADCE6257B) is found to be the owner of the money appearing in the bank account(s) to the tune of Rs.1,46,12,000/- and hence, the financial transaction as discussed above is clearly attract the provision of Section 69A of the Income Tax Act and therefore, required to be added back to the total income of the assessee. Failure on the part of the assessee to disclose fully and truly all the material facts necessary for the assessment , the income of the assessee has escaped assessment to the tune of Rs.1,46,42,000/- for the AY 2017-18 within the meaning of Section 147 of the Income Tax Act, 1961. I have, therefore, reason to believe that this is fit case for reopening the assessment u/s. 147 of the Act and for the issue of notice u/s. 148 of the Income Tax Act, 1961.” 6.9) On receipt of above reasons, the petitioner filed objections on 26.05.2021 which were rejected by the respondent authority by order dated 12.08.2021. Hence, this petition. 7. Learned advocate Mr. Ketan H. Shah for the petitioner submitted that reopening the assessment by the Assessing Officer under section 147 of the Act, 1961, is nothing but Page 6 of 12 C/SCA/14401/2021 JUDGMENT DATED: 14/06/2022 change of opinion because the issue with regard to the cash deposit during the demonitisation period was examined during the course of regular assessment completed under section 143(3) of the Act, 1961. 7.1) In support of his submission, learned advocate Mr. Shah relied upon the decision of Division Bench of this Court in case of Gujarat Power Corporation Ltd. v. Assistant Commissioner of Income-Tax reported in (2013) 350 ITR 266 (Guj) : “27. From the above discussion, it will emerge that when in an assessment framed by the Assessing Officer, if a certain claim of the assessee is not examined, no queries raised, no answers elicited, it can not be stated that merely because the Assessing Officer did not reject such a claim in the final order of assessment, he should be deemed to have expressed an opinion with respect to such a claim and any reopening of an assessment of this nature even within a period of four years from the end of relevant assessment year would amount to change of opinion. We are further of the opinion that in any such case, as long as there is some tangible material on the basis of which the Assessing Officer can form a belief that the income chargeable to tax has escaped assessment, it would be permissible to reopen the assessment in exercise of powers under section 147 of the Act, particularly after the amendments made with effect from 1.4.1989. Such tangible material need not be alien to the record.” 8. On the other hand, learned Senior Advocate Mr. Manish Bhatt appearing for the Revenue submitted that the Assessing Officer has issued the impugned notice under section 148 of the Act, 1961 as he has reason to believe that income has Page 7 of 12 C/SCA/14401/2021 JUDGMENT DATED: 14/06/2022 escaped assessment and there is no change of opinion as canvassed on behalf of the petitioner so as to render the impugned notice bad in law because the record itself reflects that the petitioner was not in a position to explain the nature and source of deposit in the bank accounts after the demonitisation period. 8.1) Learned Senior Advocate Mr. Bhatt would submit that in order to issue notice under section 148 of the Act, 1961 tangible material can be from the material available on record itself. It was pointed out that in response to the notice under section 142(1) of the Act, 1961, the petitioner did not submit the required details and therefore, the Assessing Officer has reason to believe that income has escaped assessment for failure on part of the petitioner in disclosing truly and fully the correct material facts. 9. We have heard learned advocates appearing for the respective parties and perused the material on record. It is not in dispute that the Assessing Officer before issuing notice under section 142(1) of the Act,1961 called for details of cash deposited by the assessee during the demonitisation period. Investigation was also carried out by DDIT by issuing summons under section 131(1A) of the Act, 1961 in the year 2018 and the petitioner furnished all the Page 8 of 12 C/SCA/14401/2021 JUDGMENT DATED: 14/06/2022 required details in compliance of such summons. Thus while passing the order under section 143(3) on 20.11.2019, the Assessing Officer considered the summons issued by the DDIT as well as the reply of the assessee pursuant to the notice under section 142(1) of the Act, 1961. From the reply of the petitioner to the notice under section1 142(1) of the Act, 1961 it appears that the petitioner had furnished all the required details including the bank statement for the period from 8.11.2016 to 31.12.2016 and thereafter the Assessing Officer passed the assessment order under section 143(3) of the Act,1961. 10. The petitioner in reply dated 29.01.2018 pursuant to the summons issued under section 131(1A) of the Act, 1961 has described the business and operation of the petitioner company and has also submitted source of cash deposit and cash withdrawal during the financial years 2015-2016 and 2016-2017. The petitioner also by reply dated 12.11.2019 in compliance of notice under section 142(1) of the Act provided the same details pursuant to question nos. 20, 21, 22 and 27 by furnishing the details of cash deposit in the bank account from 9.11.2016 to 31.12.2016 along with bank statement. The petitioner also explained that the petitioner has tie-ups/service agreements with various service providers to collect bill payments on Page 9 of 12 C/SCA/14401/2021 JUDGMENT DATED: 14/06/2022 behalf of them by various modes of payment including cash, cheque, Debit/Credit cards etc. and the petitioner received commission income against collection facilities provided to such service providers like electricity, gas etc.. The petitioner appoints Local Business Associates to collect the bill payments on behalf of the service providers and thereafter deposits such cash collected by the petitioners on behalf of the service providers in the bank accounts. Thus the petitioner explained the source of cash collected and deposit thereof in the bank account during the demonitisation period. 11. Therefore, the reasons recorded by the Assessing Officer is required to be looked considering the facts so as to enable the Assessing Officer to form a belief that income chargeable to tax had escaped assessment on the basis of materials which was available with him. During the course of regular assessment, the Assessing Officer had asked the assessee to explain the source of cash deposit after demonitisation which was explained by the assessee in reply to the notice under section 142(1) of the Act, 1961 which is accepted by the Assessing Officer while framing the assessment under section 143(3) of the Act, 1961. Therefore, ratio laid down by this Court in case of Swati Malove Divetia V. Income Tax Officer Page 10 of 12 C/SCA/14401/2021 JUDGMENT DATED: 14/06/2022 reported in [2018] 98 taxmann.com 447 (Gujarat) is applicable to the facts of the present case as the Assessing Officer has recorded the reasons ignoring the reply of the assessee during the course of regular assessment and hence the reasons recorded by the Assessing Officer to reopen the assessment under section 147 of the Act lacks validity and the Assessing Officer proceeded on erroneous premise. 12. This Court in case of Gujarat Power Corporation Ltd.(supra) has held that merely because the Assessing Officer did not record the reasons for making no disallowance in the assessment order under section 143(3) of the Act, 1961, would be of no consequence when during the course of assessment proceedings, the Assessing Officer did not reject the reply of the assessee and therefore, any reopening of such assessment would amount to change of opinion. If the Assessing Officer has some tangible material in his possession on the basis of which the Assessing Officer can form the belief that income chargeable to tax has escaped assessment, it would be permissible to reopen the assessment in exercise of powers under section 147 of the Act, 1961. However, such tangible material which is otherwise available on the original assessment record and when there is a complete disclosure of all relevant facts upon which the assessment is made, the Assessing Page 11 of 12 C/SCA/14401/2021 JUDGMENT DATED: 14/06/2022 Officer cannot reopen the assessment on the ground that the income has escaped assessment due to failure on part of the assessee to disclose truly and fully the material facts. 13. In view of the foregoing reasons, the petition requires consideration and is accordingly allowed. Notice dated 30.03.2021 (Annexure-F) issued by the respondent authority under section 148 of the Act, 1961 is hereby quashed and set aside and as a consequence thereof notice dated 20.05.2021 (Annexure-G) under section 143(2) read with section 147 of the Act, 1961 as well as order dated 12.08.2021 rejecting the objections of the assessee (Annexure-I) passed by the respondent authority are hereby quashed and set aside. 14. Rule is made absolute to the aforesaid extent. No order as to costs. 15. In view of the above order, Civil Application does not survive and the same stands disposed of accordingly. (A.J.DESAI, J) (BHARGAV D. KARIA, J) RAGHUNATH R NAIR Page 12 of 12 "