SHILP REALTY PRIVATE LIMITED V. INCOME TAX OFFICER, WARD 4(1)(3), AHMEDABAD

SCA/13025/2021

AI Insights

The case involves Shilp Realty Private Limited challenging the notice and subsequent orders related to the reopening of their income tax assessment for the year 2013-14. The Income Tax Officer issued a notice under section 148 of the Income Tax Act, alleging that income had escaped assessment. The petitioner contested the notice and the order disposing of their objections, arguing that the reopening was based on insufficient and unverified information, and that the orders were passed without proper consideration of their objections. The court found that the Assessing Officer did not adequately address the objections and failed to provide a reasoned order, leading to the quashing of the assessment order and the notice.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 680820 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 04-10-2021
• Assessment Year: misc
• Other Referred Cases: GKN Driveshafts (INDIA) Ltd. vs. ITO, Ashish Bohra vs. ITO, Divya Jyoti Diamonds (P.) Ltd. vs. Income Tax Officer, Assistant Commissioner of Income Tax vs. Rajesh Jhaveri Stock Brokers P. Ltd., Yogendrakumar Gupta vs. ITO, Dishman Pharmaceuticals & Chemicals Ltd. vs. Deputy Commissioner of Income-tax (OSD) (No.1), Phoolchand Bajranglal vs. ITO, Banaskantha District Oilseeds Growers Co-op. Union Ltd. vs. Assistant Commissioner of Income-tax
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: MAUNA BHATT
• Assessee Lawyers: B S SOPARKAR
• Keywords: Faceless assessment; High value transactions; Income tax reassessment; Notice under section 148; Reopening of assessment; Unexplained unsecured loan
• Section: 147; 148; 143(3); 139

Judgement Text

"C/SCA/13025/2021 CAV JUDGMENT DATED: 04/10/2021 IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 13025 of 2021 FOR APPROVAL AND SIGNATURE: HONOURABLE MS. JUSTICE SONIA GOKANI and HONOURABLE MR. JUSTICE RAJENDRA M. SAREEN ========================================================== 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 ? ========================================================== SHILP REALTY PRIVATE LIMITED Versus INCOME TAX OFFICER, WARD 4(1)(3), AHMEDABAD ========================================================== Appearance: MR B S SOPARKAR(6851) for the Petitioner(s) No. 1 MRS MAUNA M BHATT(174) for the Respondent(s) No. 1,2 ========================================================== CORAM: HONOURABLE MS. JUSTICE SONIA GOKANI and HONOURABLE MR. JUSTICE RAJENDRA M. SAREEN Date : 04/10/2021 CAV JUDGMENT (PER : HONOURABLE MS. JUSTICE SONIA GOKANI) 1 This petition is preferred challenging the notice dated Page 1 of 26 C/SCA/13025/2021 CAV JUDGMENT DATED: 04/10/2021 19.03.2021 issued by the respondent No.1 under section 148 of the Income Tax Act directing the petitioner to furnish the return of income for the Assessment Year 2013-14 alleging the same to be bad in law. The petitioner also questions the order disposing of objections on 27.07.2021 by respondent No.2 as contrary to law and without any jurisdiction. 2 Brief facts are as follows:- 2.1 The petitioner filed return of income for the year 2013-14 on 11.09.2013 declaring the total loss of Rs.37,922/-. The case was not selected for scrutiny nor scrutiny assessment was framed. 2.2 Respondent No.1 issued notice under section 148 on 19.03.2020 for reopening the assessment for Assessment Year 2013-14. The petitioner filed the return, in response to the notice and reasons for reopening were supplied on 26.06.2020. According to the petitioner, these reasons are misconceived and baseless. 2.3 Various objections have been raised on 25.07.2020 and the request was made to the respondent to drop the reassessment proceedings. 2.4 After about more than a year on 27.07.2021, respondent No.2 disposed of the objections and rejected the resistance Page 2 of 26 C/SCA/13025/2021 CAV JUDGMENT DATED: 04/10/2021 by such objections in totality. It is urged and alleged that the officer did it in a hurry without dealing with the contentions of the petitioner. The impugned notice issued, thereafter, under section 148 on 19.03.2020 as also the order passed against the preliminary objections dated 27.07.2021 both are under challenge. 2.5 The prayers sought for are as follows:- “7. The Petitioner, therefore, prays that this Hon’ble Court be pleased to issue a writ of mandamus or a writ in the nature of mandamus or a writ of certiorari or a writ in the nature of certiorari or any other appropriate writ, direction or order and be pleased to: (a) quash and set aside the impugned notice dated 19.03.2020 at Annexure-’A’ and the impugned order dated 27.07.2021 at Annexure-”F” to this Petition; (b) pending the admission, hearing and final disposal of this petition, to stay implementation and operation of the notice at Annexure-’A’ and the impugned order dated 27.07.2021 at Annexure-”F” to this petition and stay further proceedings for assessment for A.Y. 2013-14; (c) any other and further relief deemed just and proper be granted in the interest of justice; (d) to provide for the cost of this petition.” 3 In response to the notice issued by this Court, learned Senior Standing Counsel Ms. Mauna Bhatt appeared and she has sought time to file the reply. However, considering the urgency and apprehension that the assessment may be framed in the interregnum, we have chosen to here both the sides finally. 4 The respondents chose to place on record the material to substantiate the reasons recorded for reopening of the Page 3 of 26 C/SCA/13025/2021 CAV JUDGMENT DATED: 04/10/2021 assessment with a request that the same can be perused confidentially as it also has a wider ramification. 5 We have heard Mr. Bandish Soparkar, learned advocate for the petitioner. According to him, the reasons recorded suffer a serious statutory illegality, as there is no independent application of mind by the Assessing Officer. It is a borrowed satisfaction received from ADIT (Investigation),Kolkata. There is nothing to indicate that the respondent examined the veracity of the information and there is a breach of statutory provision of recording the reasons and to have personal belief and satisfaction after investigation and on application of independent mind. The reasons do not show as to how the petitioner is held to be a beneficiary, as no money has been received by petitioner from M/s. Shubhshree Barter Pvt. Ltd. 5.1 According to the petitioner, no income has escaped assessment and information received from ADIT, Kolkata is about one M/s.Shubhshree Barter Pvt. Ltd. where high value transactions have been noticed. It is seen that funds have been received through RTGS mode and are paid also through RTGS. From the fund trail, it is seen that they have been layered through several companies and the petitioner is one of the beneficiaries for an amount of Rs. 1 crore. Page 4 of 26 C/SCA/13025/2021 CAV JUDGMENT DATED: 04/10/2021 5.2 According to learned advocate, the petitioner received a loan of Rs. 1 crore each from Signet Vyapaar Private Limited and Wonder Procon Private Limited, who are already taxed and hence, there is no income, which has escaped assessment as transaction is genuine, the identity of the parties is known and the creditors have the creditworthiness of providing loans. It is urged that there cannot be any addition of income and the reasons recorded are fundamentally wrong. 5.3 He further has urged that it is settled position that “there has to be a reason to believe and not a reason to suspect”. Respondent No.1 does not have any reason to believe but it is acting on a mere suspicion. It can be also be seen from the basis of the order disposing the objections, which reveals that if the assessee has sufficient material of not to believe the genuineness of the transactions, it should come on the platform of assessment set by Assessing Officer and there is no escapement of income on account of alleged transaction. Thus, when the reopening is only to verify the genuineness of transaction, it is a suspicion that they are not genuine and, hence, there is no reason to believe and notice is bad. 5.4 The main emphasis is about the order of disposing of the Page 5 of 26 C/SCA/13025/2021 CAV JUDGMENT DATED: 04/10/2021 objections. According to the petitioner, it is not a speaking order. The petitioner has raised various objections and respondent has simply brushed them aside without dealing them. The judgement of the Apex Court in GKN Driveshafts (INDIA) Ltd. vs. ITO, [2003] 259 ITR 19 and the decision of this Court in the case of Ashish Bohra vs. ITO, [2021]129 taxmann.com 52(Gujarat) have held that disposing of the objection is not an empty formality and the respondent has to apply the mind and pass a speaking order dealing with the objections of the petitioner. 6 Learned counsel for the respondent has relied on the decision of This Court in the case of Divya Jyoti Diamonds (P.) Ltd. vs. Income Tax Officer, [2021] 128 taxmann.com 419(Gujarat). She has strongly objected to any indulgence by this Court, at this juncture on the ground that it is not for the Court to see as to whether the notice, which has been given and the subjective satisfaction arrived at by the Assessing Officer will result into the addition of income. The writ jurisdiction is not to be exercised unless the Court finds that the very assessment of jurisdiction on the part of the Assessing Officer is erroneous. She also has urged that section 147 permits the reopening of assessment to Assessing Officer on his Page 6 of 26 C/SCA/13025/2021 CAV JUDGMENT DATED: 04/10/2021 forming a belief that income chargeable to tax has escaped assessment and Assessing Officer is authorised to reopen beyond the period of four years, if he believes that the assessee fails to furnish the return under section 139 of the Act and he also fails to disclose fully and truly all material facts necessary for such assessment. 6.1 She relied on the decision of Assistant Commissioner of Income Tax vs. Rajesh Jhaveri Stock Brokers P. Ltd., [2007] 291 ITR 500(SC) and the decision of this Court in the case of Yogendrakumar Gupta vs. ITO, [2014] 46 taxmann.com 56(Gujarat). 7 After we concluded the hearing of the matter in the evening, due to paucity of time when the same was fixed on the very next day morning for pronouncement, noticing the urgency made-out by the learned counsel for the petitioner, it was intimated to the Court that the assessment order had already been passed on 28th September, 2021 and the same had been intimated to the petitioner by way of an e- mail of which he was not aware till 1st October, 2021. Mrs. Mauna Bhatt, learned Senior Standing Counsel also was not made aware and according to her, this being the faceless assessement regime, she also was not communicated this aspect. Page 7 of 26 C/SCA/13025/2021 CAV JUDGMENT DATED: 04/10/2021 7.1 Accordingly, we had permitted the draft amendment to the petitioner, which has been carried-out, where the additional prayers sought for, are as follows : “(aa) quash and set aside the impugned assessment order dated 28.09.2021 at Annexure-H to this petition. (aaa) pending the admission, hearing and final disposal of this petition, to stay implementation and operation of the assessment order and notice of penalty at Annexure-H to this petition and stay recovery of tax for A.Y. 2013-14;” 8 In the aforementioned background, we notice that this is a challenge to the reopening of notice issued under section 148 of the Act after the period of four years in case of assessee for the relevant Assessment Year, the provisions of sections 147 and 148 deserve reproduction: “[Income escaping assessment. 147. If any income chargeable to tax, in the case of an assessee, has escaped assessment for any assessment year, the Assessing Officer may, subject to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance or any other allowance or deduction for such assessment year (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year). Explanation.—For the purpose of assessment or reassessment or recomputation under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, irrespective of the fact that the provisions of section 148A have not been complied with.] [Issue of notice where income has escaped assessment. Page 8 of 26 C/SCA/13025/2021 CAV JUDGMENT DATED: 04/10/2021 148. Before making the assessment, reassessment or recomputation under section 147, and subject to the provisions of section 148A, the Assessing Officer shall serve on the assessee a notice, along with a copy of the order passed, if required, under clause (d) of section 148A, requiring him to furnish within such period, as may be specified in such notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139: Provided that no notice under this section shall be issued unless there is information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the relevant assessment year and the Assessing Officer has obtained prior approval of the specified authority to issue such notice. Explanation 1.—For the purposes of this section and section 148A, the information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment means,— (i) any information flagged in the case of the assessee for the relevant assessment year in accordance with the risk management strategy formulated by the Board from time to time; (ii) any final objection raised by the Comptroller and Auditor General of India to the effect that the assessment in the case of the assessee for the relevant assessment year has not been made in accordance with the provisions of this Act. Explanation 2.—For the purposes of this section, where,— (i) a search is initiated section 132 or books of account, other documents or any assets are requisitioned under section 132A, on or after the 1st day of April, 2021, in the case of the assessee; or (ii) a survey is conducted under section 133A, other than under sub-section (2A) or sub-section (5) of that section, on or after the 1st day of April, 2021, in the case of the assessee; or (iii) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner, that any money, bullion, jewellery or other valuable article or thing, Page 9 of 26 C/SCA/13025/2021 CAV JUDGMENT DATED: 04/10/2021 seized or requisitioned under section 132 or section 132A in case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or (iv) the Assessing Officer is satisfied, with the prior approval of Principal Commissioner or Commissioner, that any books of account or documents, seized or requisitioned under section 132 section 132A in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, relate to, the assessee, the Assessing Officer shall be deemed to have information which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the three assessment years immediately preceding the assessment year relevant to the previous year in which the search is initiated or books of account, other documents or any assets are requisitioned or survey is conducted in the case of the assessee or money, bullion, jewellery or other valuable article or thing or books of account or documents are seized or requisitioned in case of any other person. Explanation 3.—For the purposes of this section, specified authority means the specified authority referred to in section 151.] 9 It is thus quite clear that the Assessing Officer, if has a reason to believe that the assessee has, in a particular year, not disclosed fully and truly all material facts necessary for his assessment of that year and that has resulted into the income chargeable to having escaped assessment, even notwithstanding any omission or failure as provided in Clause A of section 147 on the part of the assessee, the Income Tax Officer in consequence of the information in his possession, has a reason to believe that income chargeable to tax has escaped assessment for any Assessment Year, subject to the provisions of sections 148 Page 10 of 26 C/SCA/13025/2021 CAV JUDGMENT DATED: 04/10/2021 to 153, he can assess or reassess the income or recompute the loss for the concerned Assessment Year. 10 In the case of Dishman Pharmaceuticals & Chemicals Ltd. vs. Deputy Commissioner of Income-tax (OSD) (No.1), [2013] 30 taxmann.com 67(Gujarat), the Court has held that Assessing Officer must have a reason to believe that the income chargeable to tax had escaped assessment and the same has occasioned on account of either failure on the part of the assessee to make return of his income or to disclose fully and truly all material facts. The reasons recorded, of course, need to reflect the satisfaction of both these conditions. As per this decision, the Court held that there is no set formula as to how the reason is to be recorded. What is important is not the language, but the contents of the reasons, which would have a material bearing and the reasons also must emerge from records supplied and not by way of additional affidavit. Since the very purpose of bringing of section 147 on a statute book is to ensure that the party cannot get away by making a false or untrue statement at the time of original assessment and when any falsehood is noticed, it is not permissible for the party to say that even though it had to conveyed the lies, the hands of the Assessing Officer are Page 11 of 26 C/SCA/13025/2021 CAV JUDGMENT DATED: 04/10/2021 tied, since he had accepted the lies. 11 In the case of Phoolchand Bajranglal vs. ITO, [1993] (203) ITR 456, there was a question of assessment beyond the period of four years. The assessee had filed confirmatory letters from the company in support of the loan transactions. It was alleged that the interest paid to the Calcutta Company though was permitted by the Assessing Officer, for nearly 05 years on the basis of same communication from the ITO based at Calcutta, the genuineness of the loan transactions had been questioned. The Managing Director admitted that the company at Calcutta was a mere name lender and no amount had been advanced during the three consecutive assessment years. When the reassessment proceedings were initiated alleging that the fresh inference was impermissible for the Assessing Officer to draw, the Court held that it was a case of acquiring fresh information specific in nature and relating to the concluded assessment and the same revealed the falsehood of the statement of the assessee at the time of original assessment. 11.1 The Court held that subsequent information on the basis of which the Income Tax Officer acquired the reason to believe that income chargeable to tax has escaped on account of Page 12 of 26 C/SCA/13025/2021 CAV JUDGMENT DATED: 04/10/2021 the omission on the part of the assessee to fully and truly disclose primary facts, which were otherwise relatable, specific and relevant. The reopening was permitted. 12 In the case of Rajesh Jhaveri Stock Brokers P. Ltd.B(supra), the Court held that the Assessing Officer must have a reason to believe that “the income chargeable to tax has escaped assessment for a particular year for non-disclosure of the true and full material facts must not be such at the time of recording reasons that the same should conclusively lead to adding of income.” 13 In the case of Yogendrakumar Gupta (supra), this Court has considered various decisions of reopening on this very issue to hold thus: “18. As mentioned hereinabove, we had called for the original file, which had revealed new, valid and tangible information supporting Assessing Officer's opinion received from DCIT, Kolkata, based on the material found during the search by the CBI, where Basant Marketing Pvt. Ltd. is said to be a dummy company of one Shri Arun Dalmia. What has been emphasised by the learned Senior Counsel appearing for the petitioner is that the Assessing Officer had attempted to fill in the gap by terming the amount received from Basant Marketing Pvt. Ltd. as \"accommodation entry\", which she could not have done without further inquiry/ verification. Yet another contention emphasised by the learned Senior Counsel is that the post notice correspondence made after the reasons recorded could not have added anything which was lacking in the reasons themselves. He urged that in absence of any statement given by any Director of Basant Marketing Pvt. Ltd. stating that the assessee received and obtained accommodation entry in the form of loans and advances, the reasons lack basis. The Director Mr.Dalmia of Basant Marketing Pvt. Ltd. as contended also does not Page 13 of 26 C/SCA/13025/2021 CAV JUDGMENT DATED: 04/10/2021 reveal anywhere and, therefore, it is premature on the part of the Assessing Officer to so record the reasons. It is further urged that the affidavit of Rishabh Dalmia stating on oath that the loan transactions with the petitioner are genuine for having been carried out only through cheques, prima facie vindicates that the entire exercise is based on suspicion. The entire thrust, therefore, is that issuance of notice is nothing but a fishing inquiry. 19. As discussed at length while adverting to the law, that sufficiency of reasons recorded by the Assessing Officer need not be gone into by this Court. Of course, the Assessing Officer when forms his belief on the basis of subsequent new and specific information that the income chargeable to tax has escaped assessment on account of omission on the part of the assessee to make full and true disclosure of primary facts, he may start reassessment proceedings as fresh facts revealed the non-disclosure full and true. Such facts were not previously disclosed or it can be said that if previously disclosed, they expose untruthfulness of facts revealed. 20. The Assessing Officer required jurisdiction to reopen under section 147 read with section 148 of the Act, where the information must be specific and reliable. As held by the Apex Court in the case of Phul Chand Bajrang (supra), since the belief is that of the Income-tax Officer, the sufficiency of reasons for forming the belief, is not for the Court to judge but is open to an assessee to establish that there exists no belief or that the belief is not at all a bona fide one or based on vague, irrelevant and non-specific information. To that limited extent, the Court may look at the view taken by the Income-tax Officer and can examine whether any material is available on record from which the requisite belief could be formed by the Assessing Officer and whether that material has any rational connection or a live link with the formation of the requisite belief. It is also immaterial that at the time of making original assessment, the Assessing Officer could have found by further inquiry or investigation as to whether the transactions were genuine or not. If on the basis of subsequent valid information, the Assessing Officer forms a reason to believe on satisfying twin conditions prescribed under section 147 of the Act that no full and true disclosure of facts was made by the assessee at the time of original assessment and, therefore, the income chargeable to tax had escaped assessment, his belief and the notice of reassessment based on such belief/ opinion needs no interference. In the present case, since both the necessary conditions have been duly fulfilled, Page 14 of 26 C/SCA/13025/2021 CAV JUDGMENT DATED: 04/10/2021 sufficiency of the reasons is not to be gone into by this Court. The information furnished at the time of original assessment, when by subsequent information received from the DCIT, Kolkata, itself found to be controverted, the objection to the notice of reassessment under section 147 of the Act must fail. At the costs of ingemination, it needs to be mentioned that at the time of scrutiny assessment, a specific query was raised with regard to unsecured loans and advances received from the said company namely, Basant Marketing Pvt. Ltd. based at Kolkata. These being the transactions through the cheques and drafts, there would arise no question of the Assessing Officer not accepting such version of the assessee and not treating them as genuine loans and advances. Furnishing the details of names, addresses, PANs, etc. also would lose its relevance if subsequently furnished information, which has been made basis for issuance of notice impugned, concludes that Basant Marketing Pvt. Ltd. is merely a dummy company of one Shri Arun Dalmia, which provided the accommodation entries to various beneficiaries.” 14 Adverting to the facts on hands, as could be noticed from the chronology of events, the reasons recorded are as follows: “2. Brief details of information collected/received by the AO and Analysis of Information collected/received: The information received from ADIT (Inv.), Unit-1(3), Kolkata that enquiry was conducted in the case of M/s. Shubhshree Barter Pvt. Ltd. During the course of enquiry, it revealed that M/s. Barter Pvt. Ltd. Maintained an account no.912020028827335 in Axis Bank, Airport Branch, Kolkata declared profile of the customer is trade in shares and securities. The account was opened on 04-06-2012. Sudden surge of high value transaction was noticed from 31-12-2012. Multiple high value RTGS credit was noticed regularly from entities such as Tree House Education and Accessories Pvt. Ltd. Amounting to Rs.2.49 crores which followed by frequent transfer in favour of Wonder Procon Pvt. Ltd and RTGS debit in favour of entities such as Tejaswini Tradecom Pvt. Ltd, Afsons Indian Pvt. Ltd. Motive Vincom Pvtl.Ltd. Credit received in the account is immediately moved out from the account keeping minimal balance most of the time. Page 15 of 26 C/SCA/13025/2021 CAV JUDGMENT DATED: 04/10/2021 2.1 Summon u/s. 131 of the Income tax Act, 1961 was issued to M/s. Subhshree Barter pvt. Ltd. On 24-09-2019 for furnishing P & L account, balance sheet & Audit Report of M/s. Subhshree Barter pvtl Ltd, Bank account statement of A/c No.9120200228827335, explanation of credit & debit transactions in the said account along with ledgers of concerned parties in the books and supporting evidences.Summon was also served on e-mail, e-filling a/c as well as posted to the address available in ITBA but no reply has been received till date. 2.2. Further, on verification of the bank statements of the said bank account, it has been found that the bank account of M/s. Subhshree Barter Private limited A/c. No.912020028827335 gets credited through RTGS/ transfers from various entities and debits are made through RTGS/transfers to different entities. 2.3 From the bank statements collected, it appears that funds are credited through RTGS/transfers in the said bank accounts and then routed through banking channel before it reached to desired destination. This is a common practice of jama-kharchi companies in Kolkata. These are operator driven transaction which resulted into entry received by the beneficiary companies in the books. For obtaining entries in the books, beneficiary provide cash to operator which is deposited in its bank accounts or deposited in the bank accounts of some other entities followed by transfer to accounts of different concerns and finally these funds are transferred to the account of beneficiary entities. 2.4 It is seen from the fund trail that funds have been layers through several companies before it has finally been transferred to beneficiary companies. The detail of beneficiary companies/concerns emerged out of these transactions are given as under:- Sr.No. NAME OF BENEFICIARY PAN JURISDICT ION F.Y. AMOUNT(IN Rs.) 1 DESTINY SECURITIES LTD. AABCD9 470H WARD- 2(2),KOLK ATA 2012-13 1,11,41,055 2 ABHIJEET PROJECTS LTD[PATHBR EAKING PROJECTS LTD AACCA5 706E CENTRAL CIRCLE- 1(2),KOLK ATA 2012-13 3,04,00,000 3 AMBO AGRO AAECA59 CIRCLE- 2012-13 10,00,000 Page 16 of 26 C/SCA/13025/2021 CAV JUDGMENT DATED: 04/10/2021 PRODUCTS LTD 08Q 8(1),KOLK ATA 4 ANANDRATHI SHARE & STOCK BROKERS LTD AAACN3 405F CENTRAL CIRCLE 5(1), MUMBAI 2012-13 1,38,00,028 5 CAMPBELL ADVERTISING PVT AABCC0 332P CENTRAL CIRCLE- 6,DELHI 2012-13 1,00,00,000 6 EMKAY GLOBAL FINANCIAL SERVICES LTD AAACE09 94L CIRCLE- 4(1) (1),MUMBA I 2012-13 49,70,181 7 PETAL VINIMAY PVT.LTD {ANTHER VINIMAY PVT. LTD1 AABCP67 75B CIRCLE 8(1), KOLKATA 2012-13 42,00,000 8 POWER PALAZZO PVT.LTD AAECP56 99R CIRCLE3(1 )(1), AHMEDAB AD 2012-13 40,00,000 9 RAJSHREE FLAVOURS PVT LTD. AAACR7 917G WARD, 21(1), DELHI 2012-13 60,00,000 10 RASHMI METALIK LTD AACC718 3E CENTRAL CIRCLE- 2(2),KOLK ATA 2012-13 75,00,000 11 SHILP REALITY PVT.LTD AAPCS81 17C WARD-4(1) (3), AHMEDAB AD 2012-13 1,00,00,000 From the above, it is clear that during the F.Y.2012-13, the aforementioned companies/concerns have brought unaccounted money in the books via money laundering through banking channel. Further, it is evident from the above that the assessee i.e. Shilp Reality Pvt.Ltd. Is also one of the beneficiaries in whose account the fund of Rs.1,00,00,000/- has been transferred to its bank account through various entities. Since in this case only return of Page 17 of 26 C/SCA/13025/2021 CAV JUDGMENT DATED: 04/10/2021 income has been filed and no assessment has been made u/s. 143(3), the genuiness of the credit entry in the bank account of Rs.1,00,00,000/- as well as credit worthiness of the person from whom the amount was received remains unexplained. 3. Analysis of information collected/received: The assessee Shilp Reality Pvt.Ltd. Is also one of the beneficiaries in whose account the fund of Rs.1,00,00,000/- has been transferred to its bank account through various entities. Since int his case only return of income has been filed and no assessment has been made u/s. 143(3), the genuineness of the credit entry in the bank account of Rs.1,00,00,000/- as well as credit worthiness of the person from whom the amount was received remains unexplained. 4. Findings of the AO: As discussed in above paras, it is clear that assessee has obtained unsecured loan of Rs.1,00,00,000/- from various entities which is unexplained unsecured loan. Therefore, there is an escapement of income to the above extent. In view of the above, I have reason to believe that the income chargeable to tax has escaped assessment to the tune of Rs.1,00,00,000/-. Therefore, I am satisfied that it is fit case for the re-opening of assessment u/s. 147 of the I.T. Act. 5. Basis of forming reason to believe and details of escapement of income As discussed in para-2, 3 & 4 above.” 14.1 According to the Assessing Officer there is no order under section 143(3) of the Act and only return of income has been processed under section 143 of the Act and as four years have elapsed, on initiating the proceedings under section 147, he has formed a reason to believe that the income has escaped the assessment. 15 Objections have been raised on 25.07.2020. The detailed objections have been raised for initiating all reassessment proceedings. These are required to be dealt with in accordance with law, as it is not an ordeal Page 18 of 26 C/SCA/13025/2021 CAV JUDGMENT DATED: 04/10/2021 but a substantive requirement. 15.1 While disposing the objections, he writes thus: “In connection with the scrutiny assessment in your case for the A.Y.2013-14, Vide your letter dated 27.07.2020, you have simply objected the reopening of the assessment u/s. 148 of the Income Tax Act, 1961. However, prejudiced to the same, it is stated that, the case was reopened on the basis of tangible information wherein conclusive evidence was gathered that you have escaped income chargeable to tax during the F.Y. 2012-13. Genuineness of the transactions will be found out only during the assessment or after the assessment is completed. There is sufficient reason to believe that the income has escaped assessment and that the reasons for reopening of the assessment are correctly recorded and the reassessment proceedings are rightly initiated. Thus in view of the above, the objection raised is hereby rejected. Further, if the assessee has sufficient materials on hand to prove the genuineness of the said transactions, then the assessee should come to the platform of assessment set by the assessing officer to prove that there is no escapement of income on account of the alleged transactions. Hence, there is no case for the assessee at this stage to object the reopening process, which is done strictly in accordance with the law. In view of the above, the objection raised by you is hereby disposed of. The assessment proceedings are therefore, valid and further, this is to intimate you to comply with the requirement of documents and evidences as required during the assessment proceedings for the A.Y. 2013-14. The reason for re- opening in your case is already provided to you Vide letter dated 26.06.2020.” 15.2 This has been done after one year and the order is self- explanatory. This Court in the case of Banaskantha District Oilseeds Growers Co-op. Union Ltd. vs. Assistant Commissioner of Income-tax, [2015] 59 taxmann.com 328(Gujarat), noticed that on the request of Page 19 of 26 C/SCA/13025/2021 CAV JUDGMENT DATED: 04/10/2021 assessee, the Assessing Officer communicated the reasons recorded for reopening of the assessment and assessee submitted the details objections against the reopening, he did not dispose of the objections earlier and the same simultaneously, while the passing the assessment order. 15.3 The Court had referred to GKN Driveshafts (INDIA) Ltd. (supra), where it held that the Assessing Officer is bound to dispose the preliminary objections against reopening by speaking order before the proceeding with the assessment in respect of the assessment year on which such notice has been issued and this is a mandatory requirement. 15.4 What has been held by this Court is as under: “We see no justifiable reason to interfere with the order under challenge. However, we clarify that when a notice under Section 148 of the Income tax 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 notices. The assessing officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the assessing officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the assessing officer has to dispose of the objections, if filed, by passing a speaking Order before proceeding with the assessment in respect of the abovesaid five assessment years.” 15.5 The Court directed the Assessing Officer to dispose of the objections raised by the petitioner by passing a speaking order before proceeding with the assessment in respect of Page 20 of 26 C/SCA/13025/2021 CAV JUDGMENT DATED: 04/10/2021 the Assessment Year for which the notice had been issued and communicate the outcome of the same. 16 This Court in the case of Divya Jyoti Diamonds (P.) Ltd. (supra) noticed that the assessee had raised various objections and requested the Revenue to drop the reassessment proceedings. The objections raised by the assessee, since were not properly dealt with by the Assessing Officer and when he passed a mechanical order without application of his mind, the Court remanded the matter back to the Assessing Officer for afresh decision. The Court took note of the decision of GKN Driveshafts (INDIA) Ltd.(supra) as also the decision of the Delhi High Court in the case of SABH Infrastructure Ltd. vs. Asstt. CIT, [2017] 398 ITR 198(Delhi), where it has held while considering the assessee’s objection to the reopening the assessment that the assessment is not a mechanical ritual. It is a quasi judicial function and the order disposing the objection should deal with each objection and give a proper reason for conclusion. Order should reflect proper application of mind. 17 As is quite clear from what has been mentioned hereinabove that at Annexure-F what all the respondent Assessing Officer has opined that the case is reopened on Page 21 of 26 C/SCA/13025/2021 CAV JUDGMENT DATED: 04/10/2021 the basis of tangible information and the conclusive evidence has been gathered that the assessee has escaped the income chargeable to tax during the Financial Year 2012-13 and the Assessment Year 2013-14. According to him, genuineness of the transaction will be found out only during the assessment or after the assessment is completed. There is a sufficient reason to believe that the income has escaped assessment and the reasons for reopening the assessment are correctly recorded. We could notice that this order lacks any reason, although there is no requirement for elaborate reasons, but a speaking order needs to really speak the mind of the officer exercising the quasi judicial function, this not being an empty formality even if he has a reason to believe that the income has escaped the assessment and, therefore, the objections are not to be accepted. It becomes the bounden duty to exercise this satisfaction in clear and specific words so as to also convey to the party concerned that in his exercise of discharge of his duty as a quasi judicial authority, he has arrived at a conclusion, so far as objections are reassessed. 18 There may not be requirement of exhaustive elaborate essay, while discussing the reasons, but the same has to Page 22 of 26 C/SCA/13025/2021 CAV JUDGMENT DATED: 04/10/2021 be clear in conclusion, satisfying the need of the same being a speaking order. The Supreme Court in a recent decision, in a different context held as to how the write a judgement. 18.1 The decision rendered by the Apex Court in the case of Shakuntala Shukla vs. State of Uttar Pradesh and another in the case of Criminal Appeal No.876 of 2021 and allied matters on 07.09.2021, where, of course, the findings and the directions were in relation to the judgement, but broadly the same would apply to any judicial/quasi-judicial order passed in any judicial proceedings. 18.2 Apt would be to reproduce the relevant part of the said decision:- “9.4 The judgment replicates the individuality of the judge and therefore it is indispensable that it should be written with care and caution. The reasoning in the judgment should be intelligible and logical. Clarity and precision should be the goal. All conclusions should be supported by reasons duly recorded. The findings and directions should be precise and specific. Writing judgments is an art, though it involves skilful application of law and logic. We are conscious of the fact that the judges may be overburdened with the pending cases and the arrears, but at the same time, quality can never be sacrificed for quantity. Unless judgment is not in a precise manner, it would not have a sweeping impact. There are some judgments that eventually get overruled because of lack of clarity. Therefore, whenever a judgment is written, it should have clarity on facts; on submissions made on behalf of the rival parties; discussion on law points and thereafter reasoning and thereafter the ultimate conclusion and the findings and thereafter the operative portion of the order. There must be a clarity on the final relief granted. A party to the 15 Page 23 of 26 C/SCA/13025/2021 CAV JUDGMENT DATED: 04/10/2021 litigation must know what actually he has got by way of final relief. The aforesaid aspects are to be borne in mind while writing the judgment, which would reduce the burden of the appellate court too. We have come across many judgments which lack clarity on facts, reasoning and the findings and many a times it is very difficult to appreciate what the learned judge wants to convey through the judgment and because of that, matters are required to be remanded for fresh consideration. Therefore, it is desirable that the judgment should have a clarity, both on facts and law and on submissions, findings, reasonings and the ultimate relief granted.” 19 Material, which has been placed before us is the inquiry report in the case of M/s. Shubhshree Barter Pvt. Ltd. to satisfy this Court as to why the scrutiny assessment for the Assessment Year 2013-14 has been necessitated. They are presently not to be entered into because of the absence of any reason and non-compliance of the directions in GKN Driveshafts (INDIA) Ltd. (supra). Disposal of this matter is needed as dealing with the objections to the reasons recorded is not a static formality to be undergone to rush to the forming of assessment. Even while accepting the requirements of a focus on substantive justice in the process, it is a vital step towards that and hence mandate in GKN Driveshafts (INDIA) Ltd. (supra) must not be undermined, nor can that be diluted. Therefore, on Page 24 of 26 C/SCA/13025/2021 CAV JUDGMENT DATED: 04/10/2021 quashing the order of assessment and without quashing the notice, we deem it appropriate to direct the Assessing Officer to pass a speaking order taking into consideration the objections raised by the petitioner. It is not the length of the order, which is the reason of our remand, it is the cryptic manner of dealing without any semblance of reasons which necessitated such remand. Let the said task be completed at the earliest. We have ascertained from the learned counsel that there is nothing further that needs to be added to the written objections to the reasons recorded. 20 Resultantly, the order passed by the Assessing Officer disposes of objections of the petitioner dated 27th July, 2021 and the order of assessment dated 28th September, 2021 are quashed and set aside. 21 We have not entered into the merits of the matter and, therefore, this direction or disposal shall not affect the rights of the either side on merit so far as the material which has been gathered for reopening and the objections raised against the same by the other side are concerned. 21.1 On the strength of the objections raised by the petitioner, the respondent shall decide these objections in accordance Page 25 of 26 C/SCA/13025/2021 CAV JUDGMENT DATED: 04/10/2021 with law as discussed hereinabove within two weeks. If the outcome is in any manner prejudicial to the petitioner, two weeks’ further time shall be given to the petitioner to enable him to question the same. If no legal recourse is taken by him, or no direction is received by the Assessing Officer not to proceed with the finalising of such proceedings, he shall complete this assessment in the four weeks thereafter. 22 With this, the petition stands disposed of. (MS. SONIA GOKANI, J. ) (RAJENDRA M. SAREEN,J) SUDHIR Page 26 of 26 "