2022 (2) TMI 1374 - HC - Income Tax

Re-opening of assessment u/s 148 - Reasons to believe - HELD THAT - The reasons does not disclose anything that could be remotely termed reasons to believe income has escaped assessment. First of all it does not explain what reversal trade in BSE means. Secondly it does not even state on which scrip there has been any reversal trade in BSE that can be termed escapement of assessment and thirdly how could it be even linked to petitioner. Even in the affidavit in reply it is simply stated I say that the Department was having information that petitioner had made reversal trade involved in reversal trade. This is the new information received by respondent no.1 - Decided in favour of assessee.

Summary

Issues:
Impugning a notice under Section 148 of the Income Tax Act 1961 for A.Y.-2015-2016 based on reasons for reopening the assessment related to concealed income from reversal trades in BSE.

Analysis:
The petitioner challenged a notice dated 30th March 2021 issued under Section 148 of the Income Tax Act 1961 for A.Y.-2015-2016, which provided reasons for reopening the assessment. The reasons indicated that the assessee, engaged in financial services, had concealed income related to reversal trades in BSE. However, the reasons did not clearly explain what "reversal trade in BSE" meant, nor did they specify the scrip involved or establish any link to the petitioner. The lack of clarity in the reasons raised doubts about the validity of the notice as it did not provide a basis for believing that income had escaped assessment.

The petitioner's representative, Mr. Padvekar, expressed confusion about the concept of reversal trades in BSE, which was not clarified by the respondent, Mr. Sharma, or the reasons provided. The court also found the reasons inadequate in establishing a reasonable basis for suspecting income escapement. The information presented in the reasons lacked specificity and failed to connect the alleged concealed income to the petitioner, undermining the legitimacy of the notice.

In light of the vague and unsubstantiated reasons provided for reopening the assessment, the court decided to quash and set aside the notice dated 30th March 2021. Consequently, the order dated 11th August 2021, which disposed of the objections raised by the petitioner, was also annulled. The court's decision to dismiss the petition was based on the insufficiency of the reasons cited for reopening the assessment, highlighting the importance of clear and valid grounds for initiating such actions under the Income Tax Act 1961.