2022 (5) TMI 1352 - HC - Income Tax

Reopening of assessment u/s 148A - Bogus Long Term Capital Gains ( LTCG ) - HELD THAT - Petitioner has not been provided an adequate opportunity to put forward its defense/reply as the annexure accompanying the notice enumerating the reasons for initiating reassessment pertained to the Assessment Year 2015-16 and not 2018-19. It is pertinent to mention that the allegation mentioned in the 148A(b) and demand notice pertained to claim of bogus LTCG on purchase and sale of shares of Achal Investments Ltd. and not with regard to alleged accommodation entries provided by Shri Naresh Jain. Consequently, this Court is of the view that the principles of natural justice have been violated on the present case. Accordingly, the show cause notice dated 21st March, 2022 issued under Section 148A(b), the order dated 27th March, 2022 issued under Section 148A(d) and the notice dated 27th March, 2022 issued under Section 148 of the Act for the Assessment Year 2018-19 are quashed. If the law permits the respondents/revenue to take further steps in the matter, they shall be at liberty to do so. Needless to state that if and when such steps are taken and if the petitioner has a grievance, he shall be at liberty to take his remedies in accordance with law.

Summary

Issues:
Challenge to notice under Section 148 of the Income Tax Act, 1961 for Assessment Year 2018-19; Violation of principles of natural justice.

Analysis:
The petitioner challenged a notice dated 27th March, 2022 under Section 148 of the Income Tax Act, 1961 for the Assessment Year 2018-19. The petitioner argued that they were not given the minimum statutory prescribed time of seven days to reply to the notice. The notice alleged bogus Long Term Capital Gains (LTCG) on shares of a specific company, which the petitioner claimed pertained to a different assessment year. The petitioner had already responded with relevant documentary evidence, disputing the claims made in the notice. The order under Section 148A(d) did not align with the facts mentioned in the show-cause notice, creating discrepancies. The petitioner contended that the impugned order inaccurately stated that no response was furnished to the show-cause notice.

During the proceedings, it was revealed that the petitioner was issued show cause notices for different assessment years, each pertaining to distinct allegations. The respondent admitted errors in serving the correct annexure with the notice, leading to confusion between assessment years. The respondent withdrew the allegation of suppression of facts previously made. The court found that the petitioner was not provided with a fair opportunity to present their defense, as the reasons for reassessment pertained to a different assessment year than stated in the notice. Consequently, the court concluded that the principles of natural justice were violated in this case.

As a result of the above findings, the court quashed the show cause notice, order, and notice issued for the Assessment Year 2018-19. The respondents were permitted to take further steps in accordance with the law if permitted. The petitioner was granted liberty to seek remedies if aggrieved by any future steps taken by the respondents. The writ petition and pending applications were disposed of in light of the court's decision.