Mrs. Chandra Devi Kothari V. Income Tax Officer Ward 9(3)

WP/39371/2014

AI Insights

The case involves Mrs. Chandra Devi Kothari, the petitioner, who challenged an assessment order and a consequential demand notice issued by the Income Tax Officer under Sections 143(3) read with Section 147 of the Income Tax Act, 1961. The assessment for the year 2008-09 was reopened based on a sworn statement by Mr. Mukesh Choksi, who was implicated in a series of fraudulent transactions. The petitioner contended that she was not provided a copy of this statement nor was she aware of its contents, which formed the basis of the reassessment. The court found that the petitioner was not given a fair opportunity to contest the allegations against her, leading to the quashing of the assessment order and remitting the matter for fresh consideration.

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 671501 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 04-02-2015
• Assessment Year: misc
• Other Referred Cases: MR. ASHOK MITTAL VS ASSISTANT COMMISSIONER OF INCOME TAX AND ANOTHER in WP(C) No.1452/2013
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: JEEVAN NEERALGI
• Assessee Lawyers: HARISH
• Keywords: Assessment Order; Fair hearing; Income Tax; Reassessment; Writ petition
• Section: 147; 148; 143(3)

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 4TH DAY OF FEBRUARY, 2015 BEFORE THE HON’BLE MR.JUSTICE B.S.PATIL W.P.No.39371/2014 (T-IT) BETWEEN MRS CHANDRA DEVI KOTHARI W/O. DEVICHAND KOTHARI, AGED ABOUT 42 YEARS, R/AT NO.1, OMKAR VIHAR, SHARDHANAND BHAWAN ROAD, V.V.PURAM, BANGALORE-560 004. ... PETITIONER (By Sri.HARISH V.S., ADV.) AND INCOME TAX OFFICER WARD 9(3), 3RD FLOOR, JEEVAN SAMPIGE, LIC BUILDING, SAMPIGE ROAD, MALLESHWARAM, BANGALORE-560 003. ... RESPONDENT (By Sri.JEEVAN J.NEERALGI, ADV.) THIS WRIT PETITION IS FILED UNDER ARTICLES 226 & 227 OF THE CONSTITUTION OF INDIA, PRAYING TO QUASH THE IMPUGNED ASSESSMENT ORDER PASSED BY THE RESPONDENT U/S.143(3) R.W. SECTION 147 OF THE INCOME TAX ACT, 1961, DATED 30.06.2014 FOR THE ASSESSMENT YEAR 2008-09 I.E., ANNX-D AND CONSEQUENTIAL NOTICE OF DEMAND ISSUED BY THE RESPONDENT, DATED 30.06.2014 FOR THE ASSESSMENT YEAR 2009-09 I.E., ANNX-E. 2 THIS PETITION COMING ON FOR PRELIMINARY HEARING THIS DAY, THE COURT MADE THE FOLLOWING: ORDER 1. Sri Jeevan J.Neeralgi, learned counsel is directed to take notice for the respondent. 2. Learned counsel for both parties submit that the matter is covered by the judgment rendered by this Court in the connected W.P.No.39373/2014 disposed of on 29.01.2015. Hence, the matter is taken up for final disposal. 3. Petitioner is calling in question the Assessment Order dated 30.06.2014 passed by the respondent – Income Tax Officer exercising powers under Section 143(3) read with Section 147 of the Income Tax Act, 1961 (for short, ‘the Act’) for the assessment year 2008-09 vide Annexure-D. Petitioner is also challenging the consequential demand notice dated 30.06.2014 produced at Annexure-E. 4. Facts relevant for the purpose of this case stated in brief are that the assessee has filed her return of income for the Assessment Year 2008-09 on 14.09.2008 declaring her total income as `2,52,390/-. The said return was accepted. 3 Subsequently, notice under Section 148 of the Act was issued on 30.6.2014 purporting to reopen the assessment. In response, petitioner requested the respondent that the return filed earlier could be treated as return filed in response to the said notice. Thereafter, respondent concluded the assessment adding a sum of `6,51,370/- as income under the head ‘other sources’ stating that the said amount pertained to certain shares purchased by the petitioner that had allegedly escaped the assessment. Accordingly, tax and interest has been levied by the respondent on the said amount. It is this order that is challenged in the writ petition. 5. Learned Counsel for the petitioner invites the attention of the court to the representation/application filed by him on 31.01.2014 before the respondent requesting to issue copy of the sworn statement of one Mr. Mukesh Choksi on the basis whereof, proceedings were re-opened. It transpires that a search had been conducted by the income tax authorities at Mumbai on M/s. Mahasagar Securities and Mukesh Choksi Group. At that time, Mr. Mukesh Choksi had admitted to have made accommodation entries in his books to enable the clients to declare speculation profit/loss, shorter gains, etc., and had 4 identified the petitioner herein and certain others as some of the beneficiaries of the fraudulent entries/transactions by giving a sworn statement in that regard and it is based on the said sworn statement of Mukesh Choksi, respondent has re- opened the proceedings. It is in this background, petitioner had made a request to the respondent on 31.01.2014 to provide a copy of the sworn statement, so that petitioner could take further course of action. 6. It is not in dispute that petitioner was not furnished with the copy of the statement said to have been made by Mukesh Choksi. Petitioner was not aware of the contents of the said statement. However, she filed objections contending inter alia that it was not known how a statement made by third party could be made applicable and made basis for the proceedings that were sought to be initiated. Petitioner also points out by way of objection that in the absence of specific allegations made against her in the so-called sworn statement, the same could not have been made basis to pass the assessment order against her. 5 7. Despite such objections raised, respondent has proceeded to pass the impugned order holding that an amount of `6,51,370/- which reflected the sale proceeds of shares was required to be brought to tax under the head ‘Other Sources of Income’. It is this amount which according to the findings recorded by the respondent was attributed to the petitioner in the so-called sworn statement given by Mukesh Choksi. 8. Thus, it is apparent that without furnishing a copy of the statement stated to have been given by Mukesh Choksi and without notifying the petitioner regarding basis of the transaction that petitioner is said to have entered into with Mukesh Choksi, respondent has passed the impugned order. The entire basis for the impugned order is the sworn statement of Mukesh Choksi. Unless petitioner is given opportunity to have her say in the mater with regard to the said statement and its contents, it cannot be said that petitioner was given an opportunity of being heard in the matter. Hence, it has to be held that the impugned order is passed without providing any fair and reasonable opportunity of being heard to the petitioner. 9. In fact, learned Counsel for the petitioner places reliance on the judgment of the Division Bench of the Delhi High Court 6 in the case of MR. ASHOK MITTAL VS ASSISTANT COMMISSIONER OF INCOME TAX AND ANOTHER in WP(C) No.1452/2013, wherein also petitioner therein had specifically objected for the assessment proceedings stating that he had no transaction with either Mukesh Choksi or any other related companies, but the Assessing Officer had solely proceeded on the basis of the statement and the list provided without there being any other information or details furnished to the petitioner though petitioner therein had sought for such details. The High Court of Delhi has held that there was absence of fair and reasonable opportunity and such an assessment order could not be sustained and could be interfered with under Article 226 of the Constitution of India. 10. In the light of the facts and circumstances as adverted to above and as the petitioner has been denied an opportunity of fair hearing by providing copy of the statement and related details regarding the alleged share amount, I am of the view that the matter requires to be re-considered by the respondent by providing fair and reasonable opportunity of hearing to the petitioner and by furnishing the details/copy of the statement 7 based on which the impugned assessment order has been passed. 11. In the result, this writ petition is allowed. The impugned order is quashed. The matter is remitted for fresh consideration in accordance with law and in the light of the observations made above. Learned counsel for the respondent is permitted to file vakalath within three weeks from today. Sd/- JUDGE PKS "