MANI ENTERPRISE vs. THE INCOME TAX OFFICER, WARD 5(3)(1)

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SCA/4896/2022HC GujaratGJHC24015064202215 November 2022Bench: HONOURABLE THE CHIEF JUSTICE MS. JUSTICE SONIA GOKANI,HONOURABLE MRS. JUSTICE MAUNA M. BHATT4 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court disposed of the Special Civil Application. The Court noted that an order dated March 9, 2022, was received by the assessee, indicating that the total income was computed as nil, with no addition made to the income. The Court observed that the cause of the petition no longer survived because the assessment had been framed without any additions, thereby favouring the petitioner. Consequently, the interim relief granted earlier was vacated forthwith. The Court did not explicitly decide on the maintainability of the petition or the validity of the reopening notice on merits, as the petition was disposed of based on the subsequent development of the assessment order.

What were the facts?

The petitioner, Mani Enterprise, filed a Special Civil Application before the Gujarat High Court challenging a notice issued under Section 148 of the Income Tax Act, 1961, for the assessment year 2016-17. The Income Tax Officer (ITO) had reason to believe that income amounting to Rs. 79,88,004/- had escaped assessment due to the petitioner being a beneficiary of bogus Long Term Capital Gains (LTCG)/Short Term Capital Loss (STCL) in relation to penny stocks. The petitioner objected to the reassessment proceedings on January 27, 2022. As the objection was not disposed of, the petitioner approached the High Court on March 5, 2022, seeking to quash the notice and stay further proceedings. The High Court issued notice and granted an interim order in favour of the petitioner on March 8, 2022.

What were the issues?

1. Whether the Special Civil Application is maintainable when the procedure prescribed under the GKN Driveshafts judgment has not been completed, rendering the petition premature. Assessee's Contention: The petitioner argued that the reassessment proceedings were initiated based on the belief that income had escaped assessment. However, the subsequent framing of the assessment resulted in no addition to the income, rendering the original cause for the petition moot. Revenue's Contention: The respondent (ITO) contended that the petition was premature as the procedure prescribed under the GKN Driveshafts judgment had not been completed. They also argued that other grounds raised against the reopening of assessment were not sustainable.

Which sections of the Income-tax Act were involved?

Section 148

AI-generated summary — verify with the full judgment below

C/SCA/4896/2022 ORDER DATED: 15/11/2022 IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 4896 of 2022 ========================================================== MANI ENTERPRISE Versus THE INCOME TAX OFFICER, WARD 5(3)(1) ========================================================== Appearance: MS VAIBHAVI K PARIKH(3238) for the Petitioner(s) No. 1 MR.VARUN K.PATEL(3802) for the Respondent(s) No. 1,2 ========================================================== CORAM:HONOURABLE MS. JUSTICE SONIA GOKANI and HONOURABLE MRS. JUSTICE MAUNA M. BHATT

Date : 15/11/2022

ORAL ORDER (PER : HONOURABLE MS. JUSTICE SONIA GOKANI) 1. The petitioner is before this Court seeking to question the show cause notice issued under Section 148 of the Income Tax Act (hereinafter referred to as ‘the Act’) which sought to reopen the income tax assessment of the petitioner for the assessment year 2016-17. 2. The respondent supplied the copy of reasons for reopening vide notice dated 07.01.2022 which broadly states that on account of the petitioner being beneficiary of bogus LTCG/STCL in relation to a penny stock, the respondent has a reason to believe that income of Rs. 79,88,004/- has escaped Page 1 of 4

C/SCA/4896/2022 ORDER DATED: 15/11/2022 the assessment. 2.1. The petitioner raised the objection on 27.01.2022 requesting the respondent to drop the reassessment proceeding initiated for the year under consideration. 3. The petitioner chose to approach this Court on 05.03.2022 apprehending that the respondent since has not disposed of the objection raised by the petitioner, it shall frame the assessment pursuant to the issuance of notice which is impugned. With the following prayers, the present petition has been filed:- “(a) quash and set aside the impugned notice at ANNEXURE "A ” to this petition; (b) pending the admission, hearing and final disposal of this petition, to stay the implementation and operation of the notice at ANNEXURE “A" to this petition and stay the further proceedings for the Assessment Year 2016-17; (c) any other and further relief deemed just and proper be granted in the interest of justice; (d) to provide for the cost of this petition.” 3.1. This Court (Mr. J.B.Pardiwala, J. as his lordship then was and Ms. Nisha M. Thakore, J.) while issuing notice on 08.03.2022 passed the following order:- Page 2 of 4

C/SCA/4896/2022 ORDER DATED: 15/11/2022 “We have Mr. Tushar Himani, the learned senior counsel assisted by Ms. Vaibhavi Parikh, the learned counsel appearing for the writ applicant. Let Notice be issued to the respondents returnable on 26.04.2022. Let there be ad interim order in terms of para 7 (b). The respondent No.2 shall be served by Email. Direct service is permitted qua respondent No.1. Registry to list Special Civil Application No. 4876 of 2022 with this matter” 4. The affidavit-in-reply is filed by the respondent no.1 denying each and every averments and urging that the procedure prescribed under the GKN Driveshafts judgment has not been completed, hence, the petition is premature. It also further has contended that all other grounds raised against the reopening of assessment are not sustainable. 5. We have heard learned Senior Advocate Mr. Tushar Hemani assisted by learned advocate Ms. Vaibhavi Parikh for the petitioner and learned Senior Standing Counsel Mr. Varun Patel with learned Standing Counsel Mr. Dev Patel for the respondent authority. 6. Our attention is drawn to the order dated 09.03.2022 Page 3 of 4

C/SCA/4896/2022 ORDER DATED: 15/11/2022 received through e-mail by the assessee in relation to the very assessment year. The total income of the assessee is computed as nil. This, according to learned counsel, is no longer available on the website. The reason put forth by the other side is possibly because on 08.03.2022 the Court granted the interim order in favour of the petitioner. Not only the issue of disposal of objection has been put to the rest, but, ultimately, the assessment has been framed where no addition has been made to the income which has thus favoured the petition. The cause of the petition therefore no longer survives. 7. In view of the above, present petition stands disposed of. Interim relief stands vacated forthwith. (SONIA GOKANI, J) (MAUNA M. BHATT,J) Bhoomi Page 4 of 4

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