2022 (10) TMI 359 - HC - Income Tax

Validity of Reopening of assessment u/s 147 - Reliance on information collated during a survey action carried out - unexplained share capital - HELD THAT - This Court finds that the petitioner has not brought on record any material on record to establish that the reassessment proceedings are being undertaken in an arbitrary manner. The petitioner was provided with letter of the Deputy Director of Income Tax (Investigation), New Delhi, along with the Notice issued u/s 148A(b) of the Act. The said letter identified the petitioner herein with reference to information collated during a survey action carried out on the BDR Group and enclosed the survey report for the review of the AO The present reassessment proceedings have been initiated in pursuance of the aforesaid letter and survey report, which, as per the AO, shows that the funds received by the assessee as share capital from M/s BDR Builders Developers Pvt. Ltd. are not genuine. As regards the petitioner s contention that this precise issue of source of its share capital was examined during original assessment proceedings prima facie appears to be incorrect. In fact, a perusal of the order of CIT(A) reveals that while examining and verifying the veracity of the source of funds received by the petitioner herein from Rajesh Gupta HUF and Shri Sanchit Gupta, as share capital, the CIT(A) presumed that the funds received by the said shareholders from M/s BDR Builders and Developers Pvt. Ltd. were genuine and on the said assumption, the said additions were deleted. CIT (A), in fact, relied upon the confirmations issued by M/s BDR Builders and Developers Pvt. Ltd. as valid to arrive at the aforesaid finding in respect of Rajesh Gupta (HUF). This Court therefore does not find any merit in the submission of the petitioner that the doubt cast on the genuineness of the amount of Rs.17.70 Crores infused by the shareholders of the assessee from their receipts from M/s BDR Builders and Developers Pvt. Ltd., which is alleged to be an entry provider of bogus capital, is not new information. During the course of earlier assessment proceedings, the authorities did not suspect the funds received by assessee s shareholders in its transactions with M/s BDR Builders and Developers Pvt. Ltd. and relied upon the confirmations issued by the said company to hold it as genuine. The contention of revenue that M/s BDR Builders Developers Pvt. Ltd. uses layered transactions and banking channels to provide bogus share capital from bogus companies and the assessee and its shareholders are beneficiaries of the said transactions is factual and the same will have to be examined by the AO. The petitioner does not dispute that the funds received by it as share capital were raised by its shareholders from M/s BDR Builders and Developers Pvt. Ltd. and therefore the genuineness of the said transactions cannot be determined in these proceedings. The allegation of the petitioner, that its reply was not considered by the AO, is incorrect. The said reply has been noted and dealt with in the impugned order. This Court is of the view that the petitioner is challenging the impugned order on merits. The veracity of the contention of Revenue that M/s BDR Builders and Developers Pvt. Ltd. has provided bogus/fictitious capital to the petitioner herein cannot be examined in the writ proceedings. The Supreme Court in Commissioner of Income Tax and Ors. v. Chhabil Das Agarwal 2013 (8) TMI 458 - SUPREME COURT has held that the Act of 1961 provides complete machinery for assessment/reassessment of tax, the assessee is not permitted to abandon that machinery and invoke writ jurisdiction of High Court under Article 226. The present case does not fall under the exceptional grounds on which the writ jurisdiction of this Court can be invoked. Accordingly, the present writ petition along with the pending application is dismissed.

Summary

Issues:
Challenge to Order under Section 148A(d) of the Income Tax Act, 1961 and Notice under Section 148 for AY 2016-17.

Analysis:
1. The petitioner challenged the Order dated 22nd June, 2022, passed under Section 148A(d) of the Income Tax Act, 1961, along with the Notice dated 22nd June, 2022, issued under Section 148 for the Assessment Year 2016-17. The petitioner contended that the impugned order was passed without considering the Assessee's reply dated 6th June, 2022. The Assessing Officer had added Rs.17.70 Crores, alleged to be escaped income, in the original assessment order under Section 143(3) of the Act. However, the ITAT allowed the appeal, deleting the additions. The Revenue initiated reassessment proceedings based on new information received after the original assessment. The Court found no arbitrariness in the reassessment proceedings.

2. The Revenue argued that the reassessment notice was initiated based on information received post the original assessment, indicating bogus share capital transactions. The Court noted that the petitioner's claim of the issue being examined during the original assessment was incorrect. The CIT(A) had presumed the funds to be genuine, relying on confirmations issued by M/s BDR Builders and Developers Pvt. Ltd. The Court upheld the Revenue's contention that the genuineness of the transactions needed to be examined by the AO.

3. The Court emphasized that during the original assessment, authorities did not doubt the funds received from M/s BDR Builders and Developers Pvt. Ltd. The Revenue's claim that the company provided bogus share capital and the petitioner benefited from it required examination by the AO. The genuineness of the transactions could not be determined in the current proceedings. The Court dismissed the writ petition, stating that the Act provides a complete machinery for assessment/reassessment, and the writ jurisdiction could not be invoked unless under exceptional circumstances.

4. The Court clarified that the AO should decide the matter on its merits without being influenced by the observations made in the order. The judgment highlighted the importance of following the statutory assessment/reassessment procedures and refraining from bypassing them to seek relief through writ jurisdiction.