Gujarat High Court
Lodestone Software Services Private ... vs Union Of India on 27 January, 2025
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
NEUTRAL CITATION
C/SCA/8011/2022 JUDGMENT DATED: 27/01/2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 8011 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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LODESTONE SOFTWARE SERVICES PRIVATE LIMITED
Versus
UNION OF INDIA & ORS.
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Appearance:
MRS. PRAGATI PAHWA, ADVOCATE FOR THAKKAR AND PAHWA
ADVOCATES(1357) for the Petitioner(s) No. 1
M R BHATT & CO.(5953) for the Respondent(s) No. 1
MR.VARUN K.PATEL(3802) for the Respondent(s) No. 1 & 2
NOTICE SERVED for the Respondent(s) No. 3
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CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR.JUSTICE D.N.RAY
Date : 27/01/2025
ORAL JUDGMENT
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
1. Heard learned advocate Mrs.Pragati Pahwa for Thakkar and
Pahwa Advocates for the petitioner and learned Senior Standing
Counsel Mr.Varun K. Patel for the respondent Nos.1 and 2.
2. Though served, no-one appears for the respondent No.3.
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3. Rule returnable forthwith. Learned Senior Standing Counsel
Mr. Varun Patel waives service of notice of Rule on behalf of
respondent Nos.1 and 2.
4. By this petition under Article 226 of the Constitution of India,
the petitioner has prayed for quashing and setting aside the
impugned notice dated 11.03.2022 issued under Section 148A(b) of
the Income Tax Act, 1961 (for short 'the Act') and impugned order
dated 31.03.2022 passed under Section 148A(d) of the Act and
notice dated 31.03.2022 issued under Section 148 of the Act for
re-opening the assessment for the Assessment Year 2018-2019.
5 The petitioner filed return of income for the Assessment Year
2018-19 on 29.10.2018 declaring total income of Rs.2,14,36,610/-.
which was processed under Section 143(1) of the Act.
5.1. On receipt of the impugned notice, the petitioner by letter
dated 16.03.2022 filed its reply contending that there is a mismatch
of the amount reflected in the bank remittance data and amount
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reflected in the bank statement for the year under consideration. The
petitioner also enclosed the Bank Certificate issued by the Jummu &
Kashmir Bank for inward remittances received during the Financial
Year 2017-18 for Assessment Year 2018-19.
5.2 The petitioner also contended that on perusal of the Bank
Certificate, it is amply clear that all the Bank Remittance Data was
available and there was no mismatch between Bank statement and
Bank Remittance Data. The petitioner also submitted that no details
containing the alleged mismatch was provided in support of the
alleged transaction of Rs.23,74,944/- . The petitioner also requested
to provide various documents and details and opportunity of hearing
after the required information is received by the petitioner from the
respondent No.2 -Assessing Officer.
6. The respondent No.2 however, without providing the details
and materials sought for by the petitioner which was relied upon by
issuing notice under Section 148A(b) of the Act and without giving
an opportunity of hearing passed the impugned order dated
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31.03.2022 under Section 148A(d) of the Act and issue notice for
reopening on the same date.
7. Learned advocate Mrs. Pragati Pahwa for the petitioner
submitted that in the case of the petitioner for the Assessment Year
2017-18, the similar notice was issued and the petitioner has
preferred Special Civil Application No. 19898 of 2021 which was
allowed by this Court vide judgement and order dated 15.07.2024.
7.1 It was therefore, submitted that this petition for the
Assessment Year 2018-19 may also be allowed.
8. Learned Senior Standing Counsel Mr. Varun Patel could not
controvert the fact that in case of the petitioner for the Assessment
Year 2017-18, the similar notice for reopening was quashed and set
aside.
9. In view of the above, as the respondent -Assessing Officer has
failed to provide the details of mismatch on the basis of Bank
Remittance Data obtained from the Jammu & Kashmir Bank and in
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absence of an opportunity of hearing provided to the petitioner, the
impugned notice dated 31.03.2022 issued under Section 148 of the
Act is apparently without jurisdiction.
10. This Court in the case of Gokul Agro Resources Limited
Through Director Jayesh Kanubhai Thakkar Vs. Deputy
Commissioner of Income Tax, Circle 2(1)(1), Ahmedabad passed
in Special Civil Application No. 4383 of 2022 and Special Civil
Application No. 4986 of 2022 decided on 22.04.2024, the similar
facts also allowed the petitions by observing as under:-
"10. Having heard the learned advocates for the respective parties
and considering the material on record and on perusal of the
reasons recorded by the respondent Assessing Officer, it is clear
that the Assessing Officer has issued the impugned notice on the
basis of survey action u/s.133A of the Act on Jammu & Kashmir
Bank corporate headquarter at Srinagar on 11th June, 2019,
which was after the date of assessment order dated 12th
December, 2018 passed u/s.143(3) of the Act in case of the
petitioner assessee.
11. On perusal of the reasons recorded, the Jammu & Kashmir
Bank has also given explanation and clarification from the Forex
Department to the effect that the bank after receiving the bill from
the party / customer, bill amount is firstly calculated on notional
rate decided by the bank from time to time and finally at the time of
realization of the bill, it is calculated on actual settlement rate/
exchange rate on that day. By giving an example of some other
party, it was stated by the bank that the difference in the amount of
the particular entry captured in the statement of account and
remittance sheet is on account of the actual statement rate and the
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notional rate respectively applied on the same transaction. This
has led to the respondent Assessing Officer to form a reason to
believe that the transaction undertaken by the petitioner with the
respondent bank has resulted into escapement of income to the
tune of Rs. 62,77,93,196/- in form of inward and outward
remittances. In view of such facts, when the Jammu & Kashmir
Bank has clearly stated in the reply that there are two different
entries captured in the statement of account and remittance sheet
have two different types of rate one is notional and one is actually
realized and statement of account submitted to the petitioner, the
same is duly recorded in the books of accounts reflecting the
actual realized rate of foreign exchange. In such circumstances, on
application of the basic accounting principles, when the petitioner
has produced all the material before the assessing officer during
the course of the regular assessment, the respondent Assessing
Officer could not have formed a prima facie belief that there is
escapement of income in view of the material available on record
in form of details of bank accounts along with the bank statement
for the month of March-2016 of the Jammu & Kashmir Bank,
details of exchange, difference/ net loss in foreign exchange
transaction and translations along with the copies of the ledger
account of the exchange difference, details of expenditure in
foreign currency, copy of Form-15CA filed by the petitioner-
company, wherein all details of foreign remittance are reflected.
When such record was already available with the respondent
Assessing Officer, which was produced by the petitioner assessee
during the original assessment proceedings, he ought to have
considered the same and applied his mind with regard to the
material made available by the survey action under Section 133 of
the Act, which was conducted on Jammu & Kashmir Bank coupled
with the explanation tendered by the Jammu & Kashmir Bank
reflected in the reasons recorded.
13. The contention of Mr. Varun K. Patel, learned Senior Standing
Counsel for the respondent cannot be accepted as in the facts of
the case, the case would be squarely covered by the decision of
Hon'ble Apex Court in case of Commissioner of Income tax v.
Kelvinator of India Ltd., reported in (2010) 320 ITR 561(SC),
which in turn affirm the decision of the Delhi High Court which
was also reopening within four years, wherein the Hon'ble Apex
Court held as under:- para-6 thereof reads thus
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"2. A short question which arises for determination in
this batch of civil appeals is, whether the concept of
"change of opinion" stands obliterated with effect from
1st April, 1989, i.e., after substitution of Section 147 of
the Income Tax Act, 1961 by Direct Tax Laws
(Amendment) Act, 1987?
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6. ............prior to Direct Tax Laws (Amendment) Act,
1987, re-opening could be done under above two conditions
and fulfillment of the said conditions alone conferred
jurisdiction on the Assessing Officer to make a back
assessment, but in section 147 of the Act [with effect from
1st April, 1989], they are given a go-by and only one
condition has remained, viz., that where the Assessing
Officer has reason to believe that income has escaped
assessment, confers jurisdiction to re- open the assessment.
Therefore, post-1st April, 1989, power to reopen is much
wider, However, one needs to give a schematic
interpretation to the words "reason to believe" failing which,
we are afraid, Section 147 would give arbitrary powers to
the Assessing Officer to re-open assessments on the basis of
"mere change of opinion", which cannot be per se reason to
re-open. We must also keep in mind the conceptual
difference between power to review and power to re-assess.
The Assessing Officer has no power to review; he has the
power to re-assess. But reassessment has to be based on
fulfillment of certain precondition and if the concept of
"change of opinion" is removed, as contended on behalf of
the Department, then, in the garb of re-opening the
assessment, review would take place. One must treat the
concept of "change of opinion" as an in-built test to check
abuse of power by the Assessing Officer....."
14. In view of above foregoing reasons, the present
petitions succeeds and is accordingly allowed. The
impugned show cause notices u/s.148 of the Act are
hereby quashed and set aside. Rule is made absolute. No
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order as to cost.
11. Applying the above decision in the similar facts of the present
case, this petition also succeeds and is accordingly allowed. The
impugned show cause notice dated 31.03.2022 issued under Section
148 of the Act as well as impugned order passed under Section
148A(d) of the Act are hereby quashed and set aside. Rule is made
absolute. No order as to cost.
(BHARGAV D. KARIA, J)
(D.N.RAY,J)
BINA SHAH
