Reassessment Notice beyond four years & Applicability of proviso to section 147
Short Overview Return of income was processed originally under section 143(1), and no scrutiny assessment was made under section 143(3) and, therefore, proviso to section 147 did not apply, though reopening of the assessment was sought to be made after expiry of four years from the end of the relevant assessment year, there was live link between the material which suggested escapement of income and formation of belief. Under the circumstances, there was enough material before the AO to initiate proceedings under section 147 and, therefore, section 148 notice was sustained as valid.
AO received information from investigation wing as to assessee being beneficiary of providers of bogus long-term capital gain (ITCG) under section 10(38). Accordingly, AO issued notice under section 148 so as to reopen assessment after expiry of four years from the end of relevant assessment year. Assessee challenged the notice by way of writ petition taking plea of proviso to section 147 and also alleging no independent application of mind by AO.
It is held that Return of income was processed originally under section 143(1), and no scrutiny assessment was made under section 143(3) and, therefore, proviso to section 147 did not apply, though reopening of the assessment was sought to be made after expiry of four years from the end of the relevant assessment year. It was thus not necessary for AO to show that, there was any failure to disclose fully or truly all material facts necessary for assessment. While forming the opinion with regard to tax escapement, AO had noticed that rise in the share of Tuni Textiles Ltd., for the relevant year had not been supported by financial fundamental of scrip and there was a manipulation by group of syndicate like promoters, brothers and controllers who played major role in rising the price for fictitious long-term capital gain and the assessee has availed of accommodation entry to the tune of sale consideration received on sale of such shares by way of entering into dubious transaction in penny stock scrip. Therefore, information was specific with regard to transactions of penny stock entered into by the assessee with Tuni Textiles Ltd., and AO had applied his independent mind to the information and upon due satisfaction, led to form an opinion that, amount of claim of LTCG claimed by assessee chargeable to tax had escaped assessment. This fact suggested that, there was live link between the material which suggested escapement of income and formation of belief. Under the circumstances, there was enough material before the AO to initiate proceedings under section 147 and, therefore, section 148 notice was sustained as valid.
Decision: Against the assessee.
Relied: Central Provinces Mangnese Ore Company Ltd. (1991) 191 ITR 662 (SC) : 1991 TaxPub(DT) 1550 (SC).
IN THE GUJARAT HIGH COURT
J.B. PARDIWALA & ILESH J. VORA, JJ.
Kaushaliya Sampatlal Dudani v. ITO
R/Special Civil Application No. 21926 of 2019
15 March, 2021
Petitioner(s) by: Vaibhavi K. Parikh
Respondent(s) by: Mauna M. Bhatt
ORAL ORDER