2022 (5) TMI 283 - HC - Income Tax

Reopening of assessment u/s 147 - doubtful transactions of foreign remittances - Absence of opportunity given to explain the transaction - HELD THAT - The first and the foremost thing we take notice of is that whatever has been explained by Mr. Bhatt on the basis of the three documents does not figure in the reasons assigned by the Assessing Officer. Therefore, in such circumstances, the writ applicant could be said to have had no opportunity to offer its explanation as regards the transactions which Mr. Bhatt is talking about. The reasons assigned by AO are altogether on a different footing. The writ applicant in its own way has tried to explain while putting forward its objections, however, we do not find any meaningful discussion in the order disposing of the objections. In fact, none of the objections raised by the writ applicant could be said to have been taken into consideration by the Assessing Officer in a meaningful manner. We want the Assessing Officer to undertake a fresh exercise for the purpose of looking into and understanding the objections raised by the writ applicant. We are of the view that the writ applicant should be given an opportunity to even meet with what has been pointed today to us by Mr. Bhatt i.e. the transactions between M/s. Siddhi Cooperative Bank Limited, Mili Corporation and also Yashoda Enterprises and in turn with Shimmer Exim Private Limited and in turn the transactions with Shimmer Exim Private Limited undertook with the ICICI Bank Limited. If what has been pointed out by the Revenue is also to be considered as a part of the reasons, then the writ applicant must be afforded an opportunity to offer its explanation. We are not asking the Assessing Officer to furnish fresh set of reasons. Mr. Soparkar has been able to understand what has been conveyed to us by Mr. Bhatt. We leave it for the writ applicant to raise its objections even with regard to the three documents, which have been placed on record. We quash and set aside the order passed by the Assessing Officer disposing of the objections. We remit the matter to the Assessing Officer for fresh consideration of all the objections, which have been raised by the writ applicant and / or on record and we also want the Assessing Officer to consider the objections that may be offered by the writ applicant with respect to the materials which has been brought to our notice today by the Revenue.

Summary

Issues Involved:
1. Legality of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Validity of the reopening of assessment for A.Y. 2014-15.
3. Adequacy of the reasons provided for reopening the assessment.
4. Consideration of objections raised by the writ applicant.

Detailed Analysis:

1. Legality of the Notice Issued Under Section 148:
The writ applicant, a Multi-State Scheduled Cooperative Bank, challenged the notice dated 30.03.2021 issued under Section 148 of the Income Tax Act, 1961, seeking to reopen the assessment of M/s. Siddhi Cooperative Bank Limited for A.Y. 2014-15. The primary contention was that the notice should have been issued to the writ applicant bank, which had taken over M/s. Siddhi Cooperative Bank Limited w.e.f. 09.04.2019. The court observed that the notice was incorrectly issued to M/s. Siddhi Cooperative Bank Limited instead of the writ applicant bank.

2. Validity of the Reopening of Assessment:
The reopening of the assessment was based on information received from the DDIT (Inv.) Unit-2, Surat, indicating that M/s. Siddhi Cooperative Bank Limited had transmitted huge amounts to various foreign countries. The court noted that the reopening was for the A.Y. 2014-15, a period during which the writ applicant bank was not in the picture. The court emphasized that the reopening should have been properly addressed to the correct entity.

3. Adequacy of the Reasons Provided:
The reasons for reopening the assessment included allegations that M/s. Siddhi Cooperative Bank Limited had made foreign remittances for twelve entities, which were managed by Afroze Hassan Fatta and his accomplices. These transactions were alleged to be sham transactions for tax evasion purposes. The court found that the reasons provided by the Assessing Officer did not include the detailed transactions explained by the Revenue's counsel during the hearing. The court highlighted that the writ applicant had no opportunity to address these specific transactions as they were not part of the original reasons provided.

4. Consideration of Objections Raised by the Writ Applicant:
The writ applicant raised several objections, including that it did not have a license to deal with foreign remittances and that the twelve entities identified did not have any accounts with the bank. The court observed that the Assessing Officer did not meaningfully address these objections in the order disposing of them. The court directed the Assessing Officer to undertake a fresh exercise to consider all the objections raised by the writ applicant, including those related to the new transactions brought up during the hearing.

Conclusion:
The court quashed the order passed by the Assessing Officer disposing of the objections and remitted the matter for fresh consideration. The Assessing Officer was instructed to apply his mind to all the objections and provide a reasoned order after giving the writ applicant an opportunity to be heard. The court clarified that the writ applicant should be given all relevant information to address the objections adequately. The entire exercise was to be completed within two months, with the possibility for the writ applicant to challenge any adverse order by filing a fresh writ application. The court made it clear that its observations were prima facie and did not express any opinion on the merits of the case.