2021 (3) TMI 798 - HC - Income Tax

Reopening of assessment u/s 147 - case of the department that it is in receipt of specific information that the writ applicant is involved in the accommodation entries through the Venus Group - stance of the writ applicant before the Assessing Officer while putting forward his objections to the impugned notice was that the writ applicant had actually received loan during the F.Y. 2011-12 and 2012-13 i.e. A.Y. 2012-13 and 2013-14. During the A.Y. 2015-16, the said loan was repaid in installments through the RTGS - whether the impugned notice of reopening issued under Section 148 of the Act should be quashed and set aside ? - HELD THAT - Assessing Officer while disposing of the objections stated that the objections raised by the writ applicant would be examined at the time of reassessment proceedings. The Assessing Officer failed to assign any good reason why there was no merit in any of the objections raised by the writ applicant to the notice of the reopening. We are of the view that the Assessing Officer failed to exercise his jurisdiction vested in him for the purpose of dealing with the objections raised by the writ applicant. On receipt of the reasons, the noticee is entitled to file his objections and the Assessing Officer, in turn, is obliged to dispose of the objections by passing a speaking order. Though the Assessing Officer had an opportunity at the stage of dealing with the objections to verify the contention of the writ applicant, which went to the root of the matter, he very conveniently ignored the issue by taking a stance that the factual proposition would be examined at the time of reassessment proceedings after giving sufficient opportunity to the assessee. Such stance of the Assessing Officer leads this Court to prima facie believe that the Assessing Officer had no good reason to issue the impugned notice for reopening. Had the Assessing Officer been more pro-active, he would have realized upon looking into the objections raised by the writ applicant that issuing notice for the assessment year 2015-16 could be a mistake. The aforesaid aspects prima facie leave us to note that the Assessing Officer had no material to suggest that the writ applicant had made payment in cash to Sanjeet Motor Finance Pvt. Ltd. and thereafter, received the same amount back through the RTGS. We may also refer to and rely upon the observations made by a Coordinate Bench of this Court in the case of Pal Gram Hindu Sarvajanik Trust 2016 (4) TMI 311 - GUJARAT HIGH COURT . We are of the view that we should quash and set aside the order disposing of the objections passed by the Assessing Officer and remit the matter to the Assessing Officer for fresh consideration of the objections raised by the assessee. This writ application succeeds in part. The order passed by the Assessing Officer disposing of the objections dated 10.09.2018 is hereby quashed and set aside. The matter is remitted to the Assessing Officer for fresh consideration of the objections in accordance with law.

Issues Involved:

1. Validity of reopening the assessment under Section 148 of the Income Tax Act, 1961.
2. Adequacy and correctness of reasons provided by the Assessing Officer for reopening the assessment.
3. Compliance with the procedural requirements for reopening the assessment, including the disposal of objections by the assessee.

Detailed Analysis:

1. Validity of Reopening the Assessment under Section 148:

The core issue in this case is the validity of the notice issued under Section 148 of the Income Tax Act, 1961, for reopening the assessment for the assessment year 2015-16. The petitioner challenged the reopening on the grounds that the reasons provided by the Assessing Officer were factually incorrect and not based on a proper examination of the records. The petitioner argued that the reopening was based on incorrect information regarding alleged cash payments and accommodation entries involving Venus Group, which were actually repaid through RTGS in earlier years.

2. Adequacy and Correctness of Reasons Provided by the Assessing Officer:

The Assessing Officer's reasons for reopening the assessment included allegations of cash payments amounting to ?1,40,00,000 to Venus Group, which were claimed to be accommodation entries. The petitioner objected, stating that the payments were made by cheque and not in cash, and the loans were repaid in earlier years. The Assessing Officer, while disposing of the objections, did not provide a detailed examination or verification of these claims, stating that the factual propositions would be examined during reassessment proceedings. The court found that the Assessing Officer failed to address the objections adequately and did not provide a "speaking order" as required by law, thereby not exercising the jurisdiction vested in him properly.

3. Compliance with Procedural Requirements for Reopening the Assessment:

The court emphasized the procedural requirements for reopening assessments, particularly the need for the Assessing Officer to provide reasons for the reopening and to dispose of any objections raised by the assessee through a speaking order. The court referred to the Supreme Court's decision in GKN Driveshafts (India) Ltd. Vs. Income Tax Officer, which mandates that the Assessing Officer must furnish reasons and dispose of objections by passing a speaking order. The court found that the Assessing Officer's failure to provide a detailed response to the objections and to verify the factual accuracy of the claims made by the petitioner prima facie indicated a lack of good reason for issuing the notice for reopening.

Conclusion:

The court concluded that the Assessing Officer did not adequately address the objections raised by the petitioner and failed to provide a speaking order. As a result, the court quashed the order disposing of the objections and remitted the matter back to the Assessing Officer for fresh consideration of the objections in accordance with law. The Assessing Officer was directed to decide the objections by passing a speaking order within four weeks, and if the order was adverse to the assessee, the assessee could take recourse to legal remedies within four weeks from the receipt of the fresh order.

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