2022 (11) TMI 1137 - HC - Income Tax

Reopening of assessment u/s 147 - Accommodation entries received - HELD THAT - The Petitioner has not brought on record any relevant or contemporaneous documents evidencing the said purchase, i.e. bank statement etc., placed on record in this petition. As regards the disclosure, if any, of the purchase of the shares, in its earlier ROI, it was clarified by the learned counsel for the Petitioner that since the shares were bought in the same financial year, it is only the transaction with respect to sale of shares which is reported in the ROI. Thus, it is only the sale of shares which is documented by the Assessee in its ROI. SCN and impugned order states that the entity Mridul Securities is involved in providing accommodation entries and the Assessee is the beneficiary of the specified alleged transaction, in respect whereof, information has been received by the AO and the said transaction is not disputed by the Petitioner. In light of the information which forms the basis of the initiation of the inquiry and in view of the fact the petitioner has not placed on record documents to establish genuineness of the transactions with Mridul Securities, we do not find any case for interfering in the writ proceedings. This Court finds that the Petitioner has not brought on record anything to suggest that the reassessment proceedings are being undertaken in an arbitrary manner. With respect to the contention raised on the issue of limitation and the arguments of learned counsel for the Petitioner that the notice has been issued beyond limitation has already been rejected by this Court in Touchstone case 2022 (9) TMI 892 - DELHI HIGH COURT in the present case, the response of the Petitioner has been considered before passing the impugned order under Section 148A(d) of the Act by the AO. There is another curious fact that Anu Gupta, who is related to the present petitioner has also transacted for the identical shares in the same AY for the same account. Supreme Court in Commissioner of Income Tax v. Chabildas and Anr. 2013 (8) TMI 458 - SUPREME COURT has held that as the Act of 1961 provides an able machinery for assessment/reassessment of tax, the Assessee is not permitted to abandon with the machinery and invoke writ jurisdiction of the High Court under Article 226 of the Constitution of India. This Court is of the view that the present case do not fall under the exceptional ground on which a writ jurisdiction of the High Court can be invoked.

Summary

Issues:
Quashing of order under Section 148A(d) and notice under Section 148 of the Income Tax Act, 1961 for AY 2015-16.

Analysis:
1. The petitioner sought to quash the order passed under Section 148A(d) and the notice issued under Section 148 of the Income Tax Act, 1961 for the Assessment Year 2015-16. The petitioner was served a Show Cause Notice (SCN) under Section 148A(b) by the Assessing Officer, stating involvement in accommodation entries through dummy demat accounts. The petitioner received shares of Aurobindo Pharma Ltd. from one such account. The petitioner objected to the reassessment proceedings on grounds of limitation and lack of material provided by the AO.

2. The AO, after reviewing the petitioner's reply, found it fit to issue a notice under Section 148 of the Act. The petitioner's counsel argued that the petitioner did not claim exempt LTCG in the Return of Income and requested the matter be remanded for fresh consideration. The respondent contended that the petitioner failed to establish the genuineness of the share purchase transaction with Mridul Securities.

3. The Court noted that the petitioner did not provide relevant documents to evidence the share purchase transaction. The petitioner clarified that only the sale of shares was reported in the ROI as the shares were bought in the same financial year. The Court found that the petitioner did not dispute being a beneficiary of the alleged transaction with Mridul Securities, known for providing accommodation entries.

4. Regarding the limitation issue, the Court rejected the petitioner's argument citing a previous judgment. The Court differentiated the present case from a similar case where the response to the SCN was not considered, emphasizing that in the present case, the petitioner's response was taken into account before passing the impugned order.

5. The Court held that as the Income Tax Act provides a mechanism for assessment/reassessment, the petitioner cannot bypass this mechanism and directly approach the High Court under Article 226. The Court dismissed the writ petition, stating that disputed factual questions cannot be adjudicated through a writ jurisdiction, clarifying that the AO should decide the matter on its own merits.

This detailed analysis covers the issues raised in the legal judgment comprehensively, outlining the arguments presented by both parties and the Court's reasoning leading to the dismissal of the writ petition.