2024 (8) TMI 633 - HC - Income Tax

Reopening of assessment - accommodation entries under various heads such as Long Term Capital Gains/Loss or Short Term Capital Gains/Loss, Unsecured Loans, Share Premium, Bogus Gains, Contrived Losses etc. received - HELD THAT - As during the course of the regular assessment, AO has considered the Short Term Capital Gain as well as Long Term Capital Gain claimed by the assessee from the script Kaushal Tradelink Limited. Therefore the Assessing Officer has already considered the issue during the regular course of assessment and the impugned notice under Section 148 of the Act issued by the respondent no. 1 for reopening of the assessment is nothing but based on the general information received from the investigation wing pertaining to the script Kaushal Limited. The reasons recorded also does not disclose as to the particular escapement of the income. AO has issued the impugned notice on the borrowed satisfaction without application of mind and the respondent no. 2 has also granted the sanction mechanically under the pressure of work as explained in the aforesaid affidavits. The impugned notice is issued only on the basis of the information which has already been considered for making addition during the regular course of assessment, could not have been issued if the respondent authorities would have perused the material available on record in form of the Assessment Order passed under Section 143 (3) of the Act. The impugned notice, therefore cannot be sustained and therefore is accordingly quashed and set aside - Decided in favour of assessee.

Summary

Issues:
Challenging notice under Section 148 of the Income Tax Act, 1908 for Assessment Year 2017-18.

Analysis:
The High Court judgment involved a challenge to a notice issued under Section 148 of the Income Tax Act for the Assessment Year 2017-18. The petitioner contended that the notice was based on information that had already been considered during the regular assessment process. The Assessing Officer had examined in detail the Short Term Capital Gain/Loss and Long Term Capital Gain/Loss claimed by the assessee from a specific company. The petitioner argued that the notice was issued on borrowed satisfaction without proper application of mind, and the sanction for reopening the assessment was granted mechanically. The court noted that the reasons recorded for reopening did not disclose the specific escapement of income, indicating a lack of proper assessment by the authorities.

The Assessing Officer had made additions to the petitioner's income during the regular assessment based on the nature of transactions and the authenticity of the shares involved. The court highlighted that the regular assessment had already addressed the issues related to the transactions in question, rendering the notice under Section 148 redundant. The petitioner's counsel pointed out discrepancies in the reasons recorded for reopening the assessment, emphasizing that the notice lacked a specific basis for the alleged escapement of income. The court found that the notice was issued solely on general information received from the investigation wing, without a detailed examination of the material already on record from the previous assessment.

The court concluded that the impugned notice was unsustainable as it was based on information that had already been scrutinized during the regular assessment process. The lack of specific grounds for reopening the assessment and the mechanical nature of granting sanction led to the quashing of the notice. The judgment allowed the petition, setting aside the notice under Section 148 for the Assessment Year 2017-18. The court held that the notice was invalid and ruled in favor of the petitioner, with no costs imposed on either party.