Punia Capital Pvt Ltd vs The Assistant Commissioner Of ...
2023 Latest Caselaw 1551 Bom

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Chittewan



             IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                 ORDINARY ORIGINAL CIVIL JURISDICTION

                     WRIT PETITION NO.1091 OF 2022

Punia Capital Pvt. Ltd.
212, Gemstar Commercial Complex
Ramchandra Lane Extension, Kaanchpada,
Malad (West), Mumbai-400 064.                ...       Petitioner

            Versus

1. The Assistant Commissioner of
Income Tax, Circle-13(2)(2),
R.No.571, Aaykar Bhavan, M.K. Road,
Mumbai-400 020.

2. The Principal Commissioner of
Income Tax-5,
Aayakar Bhavan, M.K. Road,
Mumbai-400 020.

3. National Faceless Assessment Centre
New Delhi

4. Union of India
Aaykar Bhavan, M.K. Road,
Mumbai-400 020.                              ...       Respondents

                               ***
Mr. Mandar M. Vaidya for the Petitioner.

Mr. Akhileshwar Sharma a/w Mr. Vikas T. Khanchandani for the
Respondents.
                           ***

                         CORAM :   DHIRAJ SINGH THAKUR &
                                   ABHAY AHUJA, JJ.

                PRONOUNCED ON :    15 FEBRUARY 2023




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                                                                21. WP 1091-22.doc
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                                :JUDGMENT:

(Per DHIRAJ SINGH THAKUR, J.)

. The Petitioner challenges the validity of the notice issued

under Section 148 of the Income-tax Act, 1961 ("Act"), as also the

proceedings for reopening of assessment under Section 147 of the

Act.

2 Briefly stated the material facts are as under :

The Petitioner fled a return of income under Section 139 of

the of the Act for the assessment year 2015-16. The case was

selected for scrutiny under Computer Assisted Scrutiny Selection

('CASS'). The assessing offcer issued a notice under Section 142(1)

of the Act calling for various details mentioned therein. The

Petitioner states that pursuant to the said notice, it submitted its

fnancial statements for the year ending 31 March 2015. The

assessment proceedings were completed under Section 143(3) on

31 August 2017 accepting the loss at Rs.(-) 4,23,213/- declared in

the return of income.

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3 A notice under Section 148 of the Act dated 31 March 2021

was issued by the assessing offcer seeking to reopen the

Petitioner's assessment for assessment year 2015-16 on the ground

that the assessing offcer had reason to believe that income for that

year had escaped assessment within the meaning of Section 147 of

the Act. The notice under Section 148, therefore, required the

Petitioner to fle a return in the prescribed form for the said

assessment year within 30 days from the date of service of the said

notice. The notice was purported to have been issued after

obtaining necessary satisfaction of Principal Commissioner of

Income Tax-5, Mumbai.

4 The Petitioner further states that return of income was fled

in response to the notice under Section 148 on 13 April 2021

declaring income at Rs.(-) 4,23,213/- and further also made a

request for a copy of the reasons recorded for reopening the

assessment. This right was exercised keeping in view the

directions of the Supreme Court in the case of GKN Drivershafts

(India) Ltd. Vs. ITO1, wherein it was held that on receipt of a notice

under Section 148, the proper course for the assessee was to fle a

return if he so desired and to seek the reasons for issuing the

notice. The assessing offcer was then held bound to furnish 1 (2003) 259 ITR 19

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reasons, to which the the Noticee was entitled to fle objections to

the notice. Thereafter, assessing offcer was held to be under an

obligation to dispose of the same by passing a speaking order.

5 Respondent No.1, accordingly, supplied the reasons recorded

for reopening the assessment vide communication dated 23 June

2021, which read as under :

1. .........

2 Brief details of information collected/received by the AO : In this case, credible information is received on INSIGHTS PORTAL under the high risk CRIU/VRU cases. On perusal of the information from the insights portal, it is stated that the assessee has transacted funds with the Account No.914020039098036 of M/s Outstripe Suppliers Pvt. Ltd. which has been conclusively proven to be a shell company by the investigation wing. The assessee has taken accommodation entries amounting to Rs.2,15,00,000/- during the A.Y.

3. Analysis of information collected/received : It has been conclusively proven from the investigation report of the investigation wing that the assessee is the benefciary of accommodation entries by layering of funds through various shell companies. The details of the accommodation entries take by the assessee are categorized as under :

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Sr. No. Particulars of Bank A/c Value

1. Account No.914020039098036 Rs.2,15,00,000/-

of M/s Outstripe Suppliers Pvt. Ltd.

4. ............

5. ............

6. Basis of forming reasons to believe and details of escapement of income : As discussed above, the assessee is a benefciary of accommodation entries which the assessee has used to evade taxation. In view of this, I have reasons to believe that income more than Rs.2,15,00,000/-, chargeable to tax escaped assessment within the meaning of Section 147 of the Act, due to the failure on the part of the assessee not to disclose fully and truly all the material facts in its ROI.

7. Applicability of the provision of Section 147/151 to the facts of the case : In this case, the assessee has fled return of income, however, no scrutiny assessment has been made for A.Y. 2015-16. The only requirement to initiate proceedings u/s 147 is reasons to believe which has been recorded above.

6 Objections were fled by the assessee to the reopening of the

assessment proceedings, in which, it was stated that the reasons for

initiating reassessement proceedings were based upon an incorrect

factual matrix inasmuch it was not a case where the loan had been

taken by the Petitioner, but a case, where the loan had been

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advanced to M/s Outstripe Suppliers Pvt. Ltd. on which, the

Petitioner was also receiving interest, which details had been

provided during the initial assessment proceedings. The objections

were considered and rejected by virtue of Order dated 14 December

2021.

7 The Petitioner challenges the reopening of the assessment

primarily on the grounds :

That the reasons recorded for reopening of assessment

reflected non-application of mind inasmuch while in para-1 of the

reasons recorded, the assessing offcer stated that case was selected

under CASS and completed under Section 143(3) on 31 August

2017 accepting the returned income, wherein in para-7 of the said

reasons, the assessing offcer has stated that no scrutiny

assessment has been made for assessment year 2015-16.

And that the Principal Commissioner of Income Tax-5,

Mumbai also mechanically appears to have accorded sanction to the

issuance of the notice under Section 148 without noticing the

contradiction highlighted hereinabove and without verifying as to

whether the case was actually ft for grant of such sanction for

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reopening of the assessment proceedings.

8 In the reply fled by the Respondent, it is admitted that it was

only due to inadvertence that in para-7 of the reasons recorded

that a stand was taken that no scrutiny assessment had been made.

The Respondent in their reply affdavit further tried to support

their action in reopening the assessment on the ground that the

assesee made a transaction with M/s Outstripe Suppliers Pvt. Ltd.,

which had been proved to be merely a paper company and had been

struck of from the rolls by the Registrar of Companies. It is further

stated that information regarding accommodation entry was a new

information, which was not a part of scrutiny at the time of original

assessment proceedings under Section 143(3) of the Act.

9 Section 147 of the Act as it stood prior to its substitution with

effect from 01.04.2021 by Finance Act, 2021 envisaged that if the

assessing offcer has reason to believe in any assessment year, he

may subject to provisions of Section 148 to 153, assess or reassess

such income and also any other income chargeable to tax which has

escaped assessment and which comes to his notice subsequently in

the course of the proceedings. The frst proviso of Section 147

further envisages that if an assessment under sub-section (3) of

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Section 143 has been made for the relevant assessment year, no

action shall be taken under that section after the expiry of four

years from the end of the relevant assessment year unless any

income chargeable to tax has escaped assessment for such

assessment year by reason of failure on the part of the assessee

inter alia to disclose fully and truly all material facts necessary for

his assessment, for that assessment year.

10 In Hindustan Lever Ltd Vs. R.B. Wadkar, Assistant

Commissioner of Income-tax2 this Court held :

"....The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded must disclose his mind. The reasons are the manifestation of the mind of the Assessing Offcer. The reasons recorded should be self- explanatory and should not keep the assessee guessing for the reasons. Reasons provide the link between conclusion and evidence. The reasons recorded must be based on evidence. The Assessing Offcer, in the event of challenge to the reasons, must be able to justify the same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish the vital link between the reasons and evidence. That vital link is the safeguard against arbitrary reopening of the concluded assessment."

2    2004 ITR 332 Vol.268



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11          In Hindustan Lever Ltd. (supra), the Court set aside the

notice impugned issued under Section 148 only on this ground. In

the said judgment, the Court had noticed that the Assessing Offcer

nowhere stated that there was failure on the part of the assessee to

disclose fully and truly the material facts necessary for the

assessment of that assessment year, without touching upon any of

the other grounds.

12 From a reading of the reasons recorded although it has been

mentioned that income chargeable to take had escaped assessment

on account of failure on the part of the assessee to disclose fully and

truly material facts, yet juxtaposed with the later part of the

reasons, which states that no scrutiny assessment had been made

and that the only requirement was to initiate proceedings under

Section 147 on the basis of 'reason to believe' goes to prove that the

assessing offcer had reopened the assessment only on the basis of

'reason to believe' and not failure to disclose material facts fully and

truly, on which too the assessing offcer ought to have been satisfed

as matter pertained to reopening beyond the period of four years.

13 In our opinion, the manner in which the assessing offcer

proceeded reflects total non-application of mind, which neither

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satisfes the jurisdictional condition, which was required to be

followed in terms of Section 147 nor does it in the least satisfy the

conditions prescribed in the case of Hindustan Lever Ltd. (supra),

as the assessing offcer had failed to highlight in the reasons

recorded as to which was that material fact, which was not

disclosed by the assessee in its return.

14 For the reasons mentioned above, in our opinion, notice under

Section 148 of the Act dated 31 March 2021 as also the Order dated

14 December 2021 are held to be unsustainable and are accordingly

quashed. No Order as to costs.

(ABHAY AHUJA, J.)                      (DHIRAJ SINGH THAKUR, J.)


                 Digitally signed by
RAJESH           RAJESH VASANT
VASANT           CHITTEWAN
CHITTEWAN        Date: 2023.02.15
                 18:46:47 +0530