ASHOKKUMAR KARSANBHAI PATEL vs. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 3(2), SURAT

C/SCA/18610/2018 JUDGMENT DATED: 11/07/2022 IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 18610 of 2018

FOR APPROVAL AND SIGNATURE:

HONOURABLE MR. JUSTICE N.V.ANJARIA

and HONOURABLE MR. JUSTICE BHARGAV D. KARIA

========================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ? ========================================================== ASHOKKUMAR KARSANBHAI PATEL Versus ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 3(2), SURAT ========================================================== Appearance: MR. BHAUMIK DHOLARIYA(7009) for the Petitioner(s) No. 1 MR. JAIMIN R DAVE(7022) for the Petitioner(s) No. 1 MRS KALPANAK RAVAL(1046) for the Respondent(s) No. 1 ========================================================== CORAM:HONOURABLE MR. JUSTICE N.V.ANJARIA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA

Date : 11/07/2022

ORAL JUDGMENT (PER : HONOURABLE MR. JUSTICE N.V.ANJARIA) Page 1 of 9

C/SCA/18610/2018 JUDGMENT DATED: 11/07/2022 In the facts and circumstances of the case and having regard to the request and consent of the parties through their respective learned advocates, this Special Civil Application was taken up for final consideration. 1.1 Rule returnable forthwith. Learned advocate Mr. Nikunt Raval for learned advocate Ms. Kalpana Raval waives service of Rule. 1.2 Heard learned advocate Mr. Jaimin Dave with learned advocate Mr. Bhaumik Dholariya for the petitioner and learned advocate for the respondent. 2. What is prayed in this petition is to set aside notice dated 29.03.2018 issued under section 148 of the Income Tax Act, 1961, in respect of assessment year 2011-12 by the assessing officer whereby he stated that he has reasons to believe that the income chargeable to tax for the assessment year under consideration had escaped the assessment within the meaning of section 147 of the Income Tax Act, 1961 (hereinafter mentioned as 'Act'). 3. Petitioner filed his return of income for the assessment year 2011-12 on 30.03.2012 showing total income of Rs.16,13,119/- and paid tax of Rs. 3,62,196/-. The petitioner stated that he also submitted the balance sheet indicating the bank account details. The return of income of the Page 2 of 9

C/SCA/18610/2018 JUDGMENT DATED: 11/07/2022 petitioner was processed and came to be accepted under section 143(1) of the Act. 3.1 It was thereafter that the petitioner received notice under section 148 of the Act, impugned in this Special Civil Application. By letter dated 05.11.2018, the respondent supplied copy of the reasons recorded for reopening of the assessment. 3.2 In response, the petitioner raised his objections by communication dated 26.11.2018 to submit that the reasons recorded were factually incorrect. By order dated 29.11.2018, the respondent disposed of the objections to reject the same. 3.3 Extracted hereinbelow, following were the reasons recorded, in exercise of powers to reopen the case, "2. Brief details of information collected/received by the AO: In this case, as per AIR information, the assessee has deposited cash of Rs, 10,01,500/- in the bank account held with Dena Bank. Also from the bank account statement of Dena bank, it is found that there are total credit entries of Rs. 71,39,134/- during the period under consideration. 3. Analysis of information collected/ received: The AIR information is analysed and found that the assessee has deposited huge amount of cash in bank account and the source of such cash deposits of Rs, 10,01,500/- is not established particularly in view of -. the following return data analysis: Particulars A.Y. 2010-11 A.Y. 2011-12 Capital 815979 5159611 Page 3 of 9

C/SCA/18610/2018 JUDGMENT DATED: 11/07/2022 Cash on hand 138972 693572 Gross receipt 214200 234125 Purchase 0 0 Taxes paid 0 0 * Income and capital of the assessee is increased during the year due to LTCG In view of the above, it transpired that the assessee has shown minimal gross receipt and has not paid any taxes during the year and consideration and preceding year also out of regular business activities, which shows no worth of the assessee. Further the assessee has shown LTCG of Rs.1477237/- after claiming deducting u/s 54 of the Act of Rs.2667005/- from the sales proceeds of Rs.45,00,000/-. Also there is total credit entries of Rs.71,39,134 in the bank account of Dena Bank bearing account no. 020110026641. It it is considered that the assessee

has

received

sale

consideration

of Rs.45,00,000/- and business receipts of Rs.2,34,125/- totalint to Rs. 47,34,125/-. Thus there is difference of Rs.24,05,009/- which is unexplained credits, which requires to be taxed under the provisions of income tax act." 3.3.1 Summarising, the respondent sought to reopen the assessment on the following two grounds, (i) Firstly, it is alleged that the petitioner has deposited cash in bank account to the tune of Rs. 10,01,500/and source of such deposit is not

established. (ii) Secondly, it is alleged that there are credit entries of Rs. 71,39,134/- in the bank account with Dena Bank bearing account no. 020110026641. Out of such credits, Rs. 45,00,000/- is towards the sale consideration whereas Rs. 2,34,125/is towards the business receipts (professional receipts). But the remaining credits of Rs. 24,05,009/- are unexplained credits. 3.4 In the objections filed, the petitioner Page 4 of 9

C/SCA/18610/2018 JUDGMENT DATED: 11/07/2022 elaborated as to how the reasons weighed with the assessing officer to exercise the powers were factually erroneous. 4. Assailing the notice to reopen the assessment and the grounds applied for reopening, the order of rejection thereof, learned advocate for the petitioner submitted that he had two bank accounts with Dena Bank, Katargam Branch and with Varachha Coo-op Bank Ltd., Katargam Branch and in the year under consideration, there was not a single entry or or sum of entries showing the credit of Rs.10,01,500/-. The details of gross total receipt and details of withdrawal from the said account were also indicated to submit that there was no escapement of income which was chargeable to tax since all the receipts were duly offered to tax in the relevant assessment year. It was contended that the reasons given by the assessing officer were backdated and the respondent proceeded to reopen the case even without in possession of the copy of the bank account of the petitioner. 4.1 On the other hand, learned advocate for the respondent, relied on the affidavit-in-reply filed on behalf of the respondent to submit that the information was available regarding deposit of cash by the petitioner. It was submitted that withdrawal of Rs. 5,00,000/- and redeposit thereof was not acceptable and that it was disputed and further that Page 5 of 9

C/SCA/18610/2018 JUDGMENT DATED: 11/07/2022 there was no specific purpose indicated for withdrawal and redeposit of the amount. It was submitted that advancing of Rs. 21,00,000/- to Kokilaben J. Vasoya was doubtful and was not ascertainable. It was submitted that there was prima facie case and material available with the assessing officer on the basis of which he could reopen the case of the assessee. The decision of the Supreme Court in Raymond Woolen Mills. Vs. ITO[(1999) 236 ITR 34 (SC)] was pressed into service to submit that the Court would not go into the sufficiency of material available. 5. From the compass of facts relating to the controversy as to whether the powers to reopen the assessment could have been legally exercised, following facts emerging from the record becomes material to be highlighted, (i) Petitioner herein had two bank accounts with one with Dena Bank, Katargam Branch and another with The Varachha Coop Bank Limited, Katargam Branch. On perusal of the Bank Statements for A.Y. 2011-12, it became crystal clear that not a single entry was there nor were sum of entries indicating credit of Rs. 10,01,500/-. (ii) The second reason for re-opening the assessment is also factually incorrect in as much as Rs. 71,93,134/- were the gross total receipts in the bank account with Dena Bank bearing account no. Page 6 of 9

C/SCA/18610/2018 JUDGMENT DATED: 11/07/2022 020110026641. (iii) On perusal of the Bank Account it becomes clear that during the said assessment year, the assessee had withdrawn Rs. 5,00,000/- + 4,50,000/- as cash to self on 23.12.2010 and 08.01.2011 respectively. (iv) Out of the said amount Rs. 5,00,000/- was re- deposited on 15.02.2011. (v) Similarly, the assessee has advanced Rs. 21,00,000/to Smt. Kokilaben J Vasoya (maternal aunt) and she has refunded the amount of Rs 21,00 000/on 30.03.2011. Therefore, net receipt of the assessee for the A.Y. 2011-12 was Rs. 47,34,125/- and the said receipts were duly offered to tax. 5.1 Thus, the petitioner assessee has been successfully able to dislodge the very facts mentioned in the reasons recorded to reopen. Therefore, there does not exist any factual foundation to exercise the powers to reopen the assessment. 5.2 This Court in M/s. Gujarat Eco Textile Park Ltd. vs. Asst. Commissioner of Income Tax in Special Civil Application No. 4017 of 2016, has held that power to reopening of the assessment could not be exercised on factually wrong premises. Also in Inductotherm (India) P. Ltd. vs. M. Gopalan, DCIT [(2013) 356 ITR Page 7 of 9

C/SCA/18610/2018 JUDGMENT DATED: 11/07/2022 481(Guj.)], observed as under, "It would, thus, emerge that even in the case of reopening of an assessment which was previously accepted under section 143(1) of the Act without scrutiny, the Assessing Officer would have power to reopen the assessment, provided he had some tangible material on the basis of which he could form a reason to believe that income chargeable to tax had excaped assessment." 5.3 This court in Sunrise Education Trust v. Income-Tax Officer (Exemption) [(2018) 92 taxmann.com 74 (Guj)] and in Ghanshyambhai Ambalal Thakkar v. Deputy Commissioner of Income-tax [(2017) 85 taxmann.com 49 (Guj)], took the view that for the purpose of mere verification of facts, the powers to reopen cannot be exercised. 6. In the present case, the very foundation of facts alleged for arriving at the opinion and to hold the reasons for reopening the assessment was absent. Re-opening of concluded case of assessment without factual foundation is not only rendered illegal but partakes abuse of powers. 7. For all the reasons and discussions above, the petition deserves to be allowed. Resultantly, notice dated 29.03.2018 issued by the assessing officer under section 148 of the Act for assessment year 2011-12 seeking to reopen assessment and all consequent steps and orders are set aside. Petition Page 8 of 9

C/SCA/18610/2018 JUDGMENT DATED: 11/07/2022 is allowed. Rule is made absolute. (N.V.ANJARIA, J) (BHARGAV D. KARIA, J) BIJOY B. PILLAI Page 9 of 9