Gujarat High Court
Ashishbhai Jashwantbhai Desai Huf vs Income Tax Officer , Ward 5(3)(1) on 7 January, 2025
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
NEUTRAL CITATION
C/SCA/1998/2022 JUDGMENT DATED: 07/01/2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 1998 of 2022
With
R/SPECIAL CIVIL APPLICATION NO. 3963 of 2022
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR.JUSTICE D.N.RAY
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Approved for Reporting Yes No
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ASHISHBHAI JASHWANTBHAI DESAI HUF
Versus
INCOME TAX OFFICER , WARD 5(3)(1) & ANR.
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Appearance:
MR TUSHAR HEMANI, LD.SR.ADV WITH MS VAIBHAVI K PARIKH(3238)
for the Petitioner(s) No. 1
MR.VARUN K.PATEL(3802) for the Respondent(s) No. 1,2
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CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR.JUSTICE D.N.RAY
Date : 07/01/2025
COMMON ORAL JUDGMENT
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
1. Heard learned Senior Advocate Mr.Tushar
Hemani with learned advocate Ms.Vaibhavi K.
Parikh for the petitioners and learned Senior
Standing Counsel Mr.Varun K. Patel with
learned advocate Mr.Dev D. Patel for the
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respondents.
2. Rule, returnable forthwith. Learned Senior
Standing Counsel Mr.Varun K. Patel waives
service of notice of rule for and on behalf of
the respondents.
3. Learned advocate Mr.Dev Patel for the
respondents sought permission to place on
record the Annexure-R/1 to the affidavit-in-
reply in Special Civil Application No.1998 of
2022. Permission is granted.
4. By this petition Article 226 of the
Constitution of India, the petitioners have
challenged the notice dated 30th March, 2021
issued under Section 148 of the Income Tax
Act, 1961 (for short 'the Act') for Assessment
Year 2017-18. Special Civil Application
No.1998 of 2022 pertains to the HUF while,
Special Civil Application No.3963 of 2022
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C/SCA/1998/2022 JUDGMENT DATED: 07/01/2025
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pertains to the individual.
5.1. The petitioners filed return of income
for the year under consideration disclosing
the Short Term Capital Gains on sale of shares
of Kushal Tradelink Limited and paid the tax
on such Short Term Capital Gains.
5.2. Thereafter, the impugned notices are
issued for re-opening. The respondent-
Assessing Officer has recorded the following
reasons in case of the HUF :
"2. Brief details of Information
collected/received by the AO: In this
case, information was reflected on
Insight Portal. On verification of the
information, it is noticed that assessee
has availed bogus LTCG amounting to
Rs.68,03,303/- through Kushal Group of
Ahmedabad during the year under
consideration.
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3. Basis of forming reasons to believe
and details of escapement of income :
On perusal of the details and
information, it is very clear that the
assessee has availed bogus LTCG
amounting to Rs.68,03,303/- through
Kushal Group of Ahmedabad during the
year under consideration. During the
course of search proceedings it was
found that Kushal Group of Ahmedabad is
involved in providing bogus LTC
Gain/Loss entries. In view of the above
facts, I have reason to believe that
income of Rs.68, 03,303/- has escaped
assessment within the meaning of section
147 of the Act. Therefore it is a fit
case foreopening of the assessment by
invoking the provision of section 147 of
the I.T. Act 1961, Accordingly it is fit
case for issuing notice u/s. 148 of the
I.T. Act."
5.3. The Assessing Officer has recorded the
following reasons for re-opening in case of
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the individual:
"As per the Information received from
the credible sources that a search
action u/s.132 of the Income-tax Act,
1961 was carried on 05.02.2019 in the
case of Kaushal Group. During the
course of search action various
incriminating documents were found and
seized from the premises of Kaushal
Group (Kaushal Limited). It is further
worth to mention here that, on going
through the information available in
Insight Portal, it can be seen that,
Investing Wing, Ahmedabad during the
investigation found that the Kaushal
Group are managing and controlling
multiple companies and concerns which
are not carrying out any genuine
business activity. These concerns are
involved Into activity of providing
accommodation entries of various kinds
such as bogus Long Term Capital
Gain/loss or Short Term Capital
Gain/Loss, Unsecured Loans, Share
Premium, Bogus Gains, Contrived Losses
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etc.
On perusal of information so received
from Investigation Wing, Ahmedabad, it
is noticed that the assessee Ashish
Jashwantbhai Desai (ACUPD9673J) is one
of the beneficiaries who has
availed/obtained accommodation entries
to the tune of Rs.61,83,737/- from
Kaushal Limited (AABCK7885P) under
various head such as bogus Long, Term
Capital Gain/loss or Short Term Capital
Gain/Loss, Unsecured Loans Share
Pienium Bogus Gains, Contrived Losses
etc. who has controlled and managed by
Kaushal Group of companies. 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:61,83,737/- 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 a fit case for reopening the
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assessment u/s. 147 of the Act and for
issue of notice u/s. 148 of the Income-
tax Act, 1961."
5.4. The petitioners filed their objections
before the respondent-Assessing Officer
contending that the petitioners have duly
disclosed the transactions carried out for
purchase and sale of the shares of Kushal
Tradelink Limited in the books of accounts and
tax showing the short term capital gain is
arising out of such transactions and there is
no long term capital gains earned by the HUF
during the year under consideration.
5.5. It was further contended that the
Assessing Officer did not form any reason to
believe on basis of any specific information
relatable to the transactions carried out by
the petitioners and in absence of such
information of reason to believe, the impugned
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notices are without jurisdiction.
6.1. Learned Senior Advocate Mr.Tushar
Hemani for the petitioners submitted that the
respondent-Assessing Officer, without any
basis, has formed a reason to believe that the
petitioners, being one of the beneficiaries,
are availing the Long Term Capital Gain/loss
or Short Term Capital Gain/Loss, Unsecured
Loans, Share Premium, Bogus Gains, Contrived
Losses etc., out of the transactions with
Kushal Tradelink Limited. It was submitted
that such vague reasons given by the Assessing
Officer clearly depict that there is no
clarity to the nature of transaction, date of
transaction, accounting treatment or
reflection in the balance-sheet and profit and
loss account of the petitioners for the year
under consideration.
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6.2. Learned Senior Advocate Mr.Tushar
Hemani referred to the computation of the
income placed on record to point out that the
petitioners have offered the Short Term
Capital Gains as income and have also paid the
tax. It was therefore submitted that the
impugned notices are issued in a mechanical
manner without application of mind and
therefore, there is no prima-facie belief as
to escapement of income chargeable to tax.
6.3. It was therefore submitted that in
absence of any live-link recorded by the
respondent-Assessing Officer, the reasons are
based only on the borrowed satisfaction and
therefore, the respondent-Assessing Officer
cannot assume jurisdiction to re-open the
assessment.
7.1. On the other hand, learned Senior
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Standing Counsel Mr.Varun K. Patel for the
respondent-Assessing Officer submitted that
there was no scrutiny assessment for the year
under consideration and the impugned notices
are issued within a period of four years and
there was only an intimation issued under
Section 143(1) of the Act accepting the
returned income. It was submitted that there
was an information available on Insight Portal
pertaining to the petitioners to the effect
that the petitioners had availed accommodation
entry from the Kushal Tradelink Limited.
7.2. It was further submitted that the
petitioners have not denied the transactions
with the Kushal Tradelink Limited who has
provided the accommodation entries to the
various assessees and petitioners are one of
such beneficiaries of such entries.
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7.3. It was therefore submitted that the
Assessing Officer on the basis of such
information has formed reason to believe to
re-open the assessment and therefore, no
interference is required to be made while
exercising extra-ordinary jurisdiction under
Article 226 of the Constitution of India.
8. Considering the submissions made by
learned advocates for both the sides and on
perusal of the reasons recorded, it appears
that the Assessing Officer has failed to give
the requisite details in the reasons recorded
so as to form a requisite prima-facie belief
that income has escaped assessment. The
reasons recorded only refer to the information
received from the credible sources that the
search was carried out in case of Kushal Group
and during course of search, incriminating
documents were found and seized and on going
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through the information available on Insigight
Portal, it was found that the petitioners are
one of the beneficiaries of the accommodation
entries in form of different types of income
like Long Terms Gains/Loss/Short Terms
Gains/Loss and also beneficiary of unsecured
loans etc., without there being any basis for
forming such belief.
9. Therefore, it is clear that the
respondent-Assessing Officer has recorded the
reasons only on the basis of the borrowed
satisfaction without there being any live-link
between the information available on the In-
sight Portal and the data available on the
record of the petitioners-assesses. In such
circumstances, the Assessing Officer cannot be
said to have formed an independent
satisfaction regarding the reasons recorded to
re-open the assessment to come to the prima-
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facie conclusion that there is escapement of
income.
10. In view of the foregoing reasons, the
petitions succeed and accordingly, allowed.
The impugned notices dated 30th March, 2021
are hereby quashed and set aside. Rule is made
absolute to the aforesaid extent with no
orders as to cost.
(BHARGAV D. KARIA, J)
(D.N.RAY,J)
PALAK
