2022 (1) TMI 372 - HC - Income Tax

Reopening of assessment u/s 147 - bogus accommodation entries receipts - allegation of non application of mind - no recommended grant of approval u/s 151 - HELD THAT - Reasons indicate total non application of mind in as much as in the tabular form, it is stated that Sharvah Multitrade Company Private Limited for F.Y. 2014-15 had been a beneficiary through fund trail - Then again, it is mentioned that the above mentioned bogus entities managed, controlled and operated by M/s. Sharvah Multitrade Company Private Limited for providing bogus accommodation entries, hence, all the transactions entered into between the above mentioned entities and the assessee/beneficiary are bogus accommodation entries in nature. What perplexes us as much as the assessee was perplexed is how can a company provide bogus entry to itself. Sharvah Multitrade Company Private Limited is alleged to be a beneficiary identified through fund trail and its PAN number is shown to be AAQCS2595H. Petitioner, who is the assessee, is also Sharvah Multitrade Company Private Limited and its PAN number is AAQCS2595H. Therefore, this clearly shows total non application of mind by the Assessing Officer Mr. Suryavanshi. His statement in the reasons and after careful application of mind is risible. There is total non application of mind. In the affidavit in reply, the same Mr. Suryavanshi states as Annexure 2 is the copy of the approval u/s 151 of the Act . There is no annexure 1 mentioned anywhere. Moreover, in the affidavit filed in the Court, even this annexure is missing. This further displays total non application of mind by this officer. The said Mr. Suryavanshi while rejecting the objections, by an order dated 23rd July 2021, first of all makes a false statement that the assessee s above submissions and objections have been carefully considered and the same are dealt with as under but he does not deal with the objection of the assessee of lack of application of mind. Mr. Suryavanshi is totally silent about the objections raised on non application of mind. In the affidavit in reply, at paragraph 9 he says it was a typographical error and inadvertent mistake because in the case information received in insight portal on 27th March 2021, only first page was displayed. Even if we accept what he says for a moment, still anyone reading the reason would realise that it defies sensibility that how the company will provide bogus entry to itself. Even otherwise this Mr. Suryavanshi had an opportunity to correct the error when he passed the order on objections but he chose to skirt the issue and he went on to say in his affidavit in reply that the objection was duly dealt with by issuing a letter dated 23rd July 2021. In our view, it has not been duly dealt with because this Mr. Suryavanshi had an obligation to deal with the objections raised by petitioner in their objections to reopening Declare that the Impugned Notice u/s 148 are wholly without jurisdiction, illegal, arbitrary, and liable to be quashed. - Decided in favour of assessee.

Summary

Issues:
Impugning notice under Section 148 of the Income Tax Act, 1961 and order on objections.

Analysis:
The petitioner challenged a notice issued under Section 148 of the Income Tax Act, 1961, and the subsequent order on objections. The primary ground raised was the alleged total non-application of mind by the Assessing Officer, Mr. Suryavanshi, throughout the process. The petitioner contended that there was a failure to disclose material facts fully and truly, as required under the proviso to Section 147 of the Act. The reasons recorded for reopening the assessment were found to be lacking in substance, with indications of a lack of application of mind. The court noted discrepancies in the officer's statements and the absence of crucial annexures, highlighting a clear lack of diligence and oversight in the proceedings.

The court scrutinized the reasons given for reopening, pointing out inconsistencies and illogical assertions made by the Assessing Officer. The court found it perplexing that the officer failed to recognize the entity in question as the same entity being accused of providing bogus entries to itself. This glaring oversight was deemed as a clear instance of non-application of mind. The court also criticized the approval process under Section 151 of the Act, highlighting deficiencies in the review and recommendation process, indicating a systemic issue of lack of diligence among the officers involved.

Furthermore, the court highlighted the petitioner's objections regarding the lack of application of mind, which were seemingly ignored by Mr. Suryavanshi in his order on objections. The court found the officer's response to be inadequate and lacking in addressing the core concerns raised by the petitioner. Despite attempts to justify the errors as typographical or inadvertent, the court emphasized the importance of addressing objections raised by taxpayers diligently and comprehensively. Ultimately, the court ruled in favor of the petitioner, declaring the impugned notice, order, and reassessment proceedings as without jurisdiction, illegal, arbitrary, and liable to be quashed.

In conclusion, the court disposed of the petition, emphasizing the need for greater diligence and training among income tax officers to ensure proper application of mind and adherence to legal procedures. The court directed copies of the order to be sent to relevant authorities for information and necessary action, underscoring the importance of upholding procedural integrity and legal standards in tax assessment processes.