2021 (12) TMI 413 - HC - Income Tax

Reopening of assessment u/s 147 - Bogus share transactions - eligibility of reasons to believe - HELD THAT - Revenue received information in respect of two penny stock companies sometime in February 2019 and petitioner was one of the beneficiary who had traded in the scrip of those two penny stock companies - also mentioned that the assessee was one of the beneficiary of transaction classified as non genuine shares sale / purchase transactions and assessee had traded to the tune of ₹ 33,68,750/- in one scrip and ₹ 1,42,42, 303/- in another scrip for A.Y.-2012-2013. According to the reasons petitioner is one such person who has availed accommodation entries of bogus sale of two penny stock companies and, therefore, the transactions are not genuine and are merely accommodation entries executed solely to accommodate unaccounted income of assessee. We do not find in these reasons anything which can be termed illusory, hypothetical or a matter of conjecture. There is nothing wrong in the notice for us to set it aside exercising our jurisdiction under Article 226 of the Constitution of India. Validity of order passed u/s 144B - As argued AO has proceeded to pass the assessment order dated 13th May 2021 disregarding the stay granted by this court - HELD THAT - This assessment order has been passed in gross breach of the order passed by this court. We would add this order amounts to willful disobedience of the order passed by this court. In fact the Assessing Officer has recorded in the assessment order there is a stay granted but because limitation in this case will be barred on 30th March 2021, he has no option but to complete the case before the limitation and passes the order on 13th May 2021. In the assessment order, the Assessing Officer is referring to a letter stating that the assessee has furnished the Hon ble High Court s letter and reproduce the letter. But it is not a letter but an order of the court, which also shows total non application of mind by the Assessing Officer and by referring to an order of this court as letter the Assessing Officer is undermining the authority of this court. At the request of Mr. Pinto we are not issuing notice for contempt against the Assessing Officer but at the same time such gross disobedience cannot be ignored. This order, therefore, has to be quashed and set aside. Since we have found there was no error in the notice dated 26th March 2019 issued under Section 148 of the Act, we would remand the matter back to that stage. The Assessing Officer shall consider the submissions of petitioner and shall, within 6 weeks from the time this order is uploaded, pass fresh order after strictly complying with the provisions of Section 144B including giving a personal hearing to petitioner. As regards the Assessing Officer who has passed the assessment order in gross breach of order passed by this court and we would say in willful disobedience of the order of this court, the Assessing Officer shall pay a sum of ₹ 25,000/- as donation from his / her personal account to P. M. Cares Fund.

Issues:
Impugning notice under Section 148 of the Income Tax Act 1961 for A.Y.-2012-2013.
Validity of reasons provided for issuing the notice.
Allegations of trading in non-genuine shares and availing accommodation entries.
Disregard of court's stay order by Assessing Officer.
Misapplication of Section 144B of the Act.
Judicial review of the assessment order.
Remand of the matter back to the Assessing Officer.
Penalty imposed on Assessing Officer for willful disobedience.

Detailed Analysis:

1. The petition challenged a notice issued under Section 148 of the Income Tax Act 1961 for A.Y.-2012-2013, alleging that the income chargeable to tax had escaped assessment. The court clarified that the Assessing Officer only needed to establish tangible material for reasons to believe, as per a previous judgment. The court emphasized that tangible material need not be new and should not be illusory or hypothetical.

2. The reasons provided in the notice alleged the petitioner's involvement in trading non-genuine shares and availing accommodation entries. The petitioner disputed these reasons, stating that they were factually incorrect as they had not traded in the mentioned penny stock companies. Despite objections raised, the Assessing Officer rejected them and proceeded with the assessment order.

3. The petitioner further raised concerns about the Assessing Officer disregarding a court-issued stay order and passing the assessment order in violation of the stay. The petitioner argued that the assessment order was also flawed for disregarding the procedure under Section 144B of the Act.

4. The court noted that the assessment order was passed in gross breach of the court's order and amounted to willful disobedience. The Assessing Officer's actions were deemed as undermining the court's authority. The court quashed the assessment order and directed a remand to the Assessing Officer for fresh consideration.

5. In response to the Assessing Officer's willful disobedience, a penalty of a donation of ?25,000 to the P. M. Cares Fund from the Assessing Officer's personal account was imposed. The Assessing Officer was required to provide proof of payment within a specified timeline, failing which further action could be taken.

6. The court emphasized the importance of compliance with legal procedures and the need for Assessing Officers to adhere to court orders. The judgment concluded by disposing of the petition and outlining the actions to be taken by the Assessing Officer in compliance with the court's directives.

This detailed analysis covers the various issues addressed in the judgment, highlighting the legal reasoning and outcomes for each aspect of the case.

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