2023 (9) TMI 1227 - HC - Income Tax

Reopening of assessment u/s 147 - assessee is a beneficiary of the Satish Saraf Group and had converted funds from cash to cheque - evidence received from the office of DDIT (Inv.), Unit-3(1), Mumbai the assessee was one of the beneficiaries of the Satish Saraf Group, managed by Satish Saraf - HELD THAT - As taking into consideration the reply filed by the petitioner explaining the fact that this was not a transaction which he had undertaken with the Satish Saraf Group and also having found that the transaction in fact was in context of commodity profit from Hrim Comtrade for an amount, it was not a case for reopening and reassessment in light of the fact that it had earlier already been gone into. The details filed from time to time along with the explanation for the transaction allegedly carried out with Satish Saraf Group. These details have been verified and placed on record. The assessee has declared the business income as computed as per the provisions of section 44AD of the Act by applying the net profit rate of 8% on the gross receipts - assessee has declared the income under the head other sources. Decided in favour of assessee.

Issues involved:
The judgment involves a challenge to a notice issued under Section 148 of the Income Tax Act for the assessment year 2014-15, based on the perception that the petitioner was a beneficiary of the Satish Saraf Group and had converted funds from cash to cheques during the financial year 2013-14.

Challenge to Notice under Section 148:
The petitioner challenged the notice dated 28.03.2021 issued under Section 148 of the Income Tax Act for the assessment year 2014-15. The petitioner had filed the original return of income for the said assessment year, and later filed a return in response to the notice. The notice was based on the perception that the petitioner was a beneficiary of the Satish Saraf Group and had converted funds from cash to cheques during the financial year 2013-14. The petitioner raised objections to these reasons provided by the Revenue.

Contentions of the Petitioner:
The petitioner, through their advocate Mr. Hardik Vora, highlighted that the transactions specified in the notice under section 133(6) of the Act were made with "Hrim Comtrade" and not the Satish Saraf Group. The petitioner provided details and contended that the income in question was from commodity profit from "Hrim Comtrade," which had been previously accepted in the assessment order for the assessment year 2012-13. The petitioner argued that the reasons to believe for reopening the assessment were not new but part of previous investigations.

Contentions of the Revenue:
Mr. Varun Patel, representing the Revenue, argued that further investigation was necessary under sections 147 & 148 of the Act based on the reasons to believe. He disputed the petitioner's assertion that the matter had already been examined in previous assessments. He contended that the grounds raised in response to the notice under section 133(6) of the Act were not included in the petition memo.

Reasons to Believe and Assessment:
The authority had recorded reasons to believe under Section 148 of the Act, stating that the petitioner was a beneficiary of the Satish Saraf Group and had converted funds from cash to cheques. The petitioner, however, explained that the transaction was with "Hrim Comtrade" and not the Satish Saraf Group. The assessment order for the assessment year 2012-13 also addressed similar transactions, indicating that the matter had been previously examined.

Judgment and Conclusion:
After considering the arguments and examining the reasons provided by the authority for reopening the assessment, the High Court quashed and set aside the impugned notice dated 28.3.2021. The petition was allowed, and the rule was made absolute in favor of the petitioner. This decision was based on the finding that the transaction in question had already been scrutinized in previous assessments, and therefore, there was no basis for reopening and reassessment.

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