2022 (11) TMI 1138 - HC - Income Tax

Reopening of assessment u/s 147 - accommodation entries entry transactions - entity Mridul Securities is involved in providing accommodation entries and the Assessee is the beneficiary of the specified alleged transaction - HELD THAT - As Petitioner contends that it has duly purchased the said 32,000 shares from Mridul Securities but there are no 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 that the transactions with Mridul Securities are admitted by the Petitioners, we do not find any case for interfering in the writ proceedings. This Court finds that the Petitioners have 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 Petitioners 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 The 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 cases do not fall under the exceptional ground on which a writ jurisdiction of the High Court can be invoked. WP dismissed.

Summary

Issues:
1. Quashing of order and notice under Income Tax Act, 1961 for AY 2016-17.
2. Allegations of receiving accommodation entries through dummy demat accounts.
3. Dispute over the purchase of 32000 shares of TVS Motor Company Ltd.
4. Assessment of Short Term Capital Gain (STCG) claimed on the sale of shares.
5. Initiation of re-assessment proceedings under Section 148 of the Act.
6. Genuineness of transactions and lack of contemporaneous documents.
7. Similar transactions by another party leading to connected writ petition.
8. Contention on limitation for issuing notice under Section 148.
9. Consideration of responses before passing impugned orders.
10. Jurisdiction of High Court under Article 226 of the Constitution.

Analysis:

1. The petitioner sought the quashing of an order and notice under the Income Tax Act, 1961 for the Assessment Year 2016-17. The petitioner, as the Karta of a Hindu Undivided Family, denied involvement with entities providing accommodation entries through dummy demat accounts.

2. Allegations arose from a Show Cause Notice indicating the receipt of shares worth Rs. 94,81,600 from a dummy demat account. The petitioner disputed these claims but admitted to trading shares through the same account, leading to suspicions of accommodation entries.

3. The dispute centered around the purchase of 32000 shares of TVS Motor Company Ltd. The petitioner claimed Short Term Capital Gain on the sale of these shares, which the Assessing Officer deemed fit for re-assessment under Section 148.

4. The petitioner argued that the transaction was genuine as the shares were listed on the Stock Exchange and sold through a legitimate platform. However, the Revenue contended that the purchase from an alleged accommodation entry provider lacked substantiating documents.

5. The court noted the absence of contemporaneous documents supporting the share purchase and highlighted the petitioner's admission of transactions with the alleged accommodation entry provider. A connected writ petition involving similar transactions was also considered.

6. The court rejected the limitation contention and emphasized the consideration of petitioner responses before issuing impugned orders. The judgment referenced previous cases to support the decision not to interfere with the re-assessment proceedings.

7. Ultimately, the court dismissed the writ petitions, stating that disputed factual matters should be addressed through the assessment machinery provided by the Income Tax Act, rather than through writ jurisdiction under Article 226 of the Constitution. The court clarified that it did not assess the merits of the controversy, leaving the matter for the Assessing Officer to decide independently.