CHANCHAL BHAGWATILAL GOKHRU vs. UNION OF INDIA AND ANR

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WP/2014/2022HC Bombay04 May 2023Bench: HON'BLE SHRI JUSTICE DHIRAJ SINGH THAKUR HON'BLE JUSTICE KAMAL KHATA5 pages
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What did the High Court hold?

The High Court held that the impugned notice dated March 26, 2021, issued under Section 148 of the Income Tax Act, 1961, for AY 2014-15, was invalid and quashed it. The Court found no indication of the Petitioner's failure to disclose any material fact. It noted that the AO had considered the very same transactions during the original assessment under Section 143(3) and added ₹1,07,18,922 to the total income, on which the Petitioner had already paid tax. The Court found no substance in the AO's belief that income had escaped assessment, as there was no mention of any tangible material supporting this conclusion. The reassessment proceedings were triggered by a change of opinion regarding the calculation of tax payable. The Court reiterated the well-settled principle that reassessment requires fresh "tangible material," and reconsideration of material available during the original assessment amounts to a change of opinion, rendering the reassessment proceedings invalid. The Court made the Rule absolute, quashing the notice and prohibiting further action.

What were the facts?

The Petitioner, Chanchal Bhagwatilal Gokhru, filed her income tax return for AY 2014-15 on July 28, 2014. The Assessing Officer (AO) passed an order under Section 143(3) on November 18, 2016, adding ₹1,07,18,922 to her total income due to the withdrawal of exemption claimed under Section 10(38). The Petitioner paid tax on this addition. Subsequently, a waiver of penalty for AY 2014-15 was granted on January 31, 2018. On March 26, 2021, a notice under Section 148 was issued to reopen the assessment for AY 2014-15, alleging that income chargeable to tax had escaped assessment. The Petitioner filed a return under Section 148, followed by notices under Sections 143(2) and 142(1). The Petitioner objected to the re-assessment, which were disposed of, leading to the filing of this Writ Petition challenging the Section 148 notice.

What were the issues?

1. Whether the notice dated March 26, 2021, issued under Section 148 of the Income Tax Act, 1961, for Assessment Year 2014-15, is valid, considering it was issued after a period of four years from the end of the relevant Assessment Year, and if the jurisdictional requirement of failure to truly and fully disclose material facts is satisfied? Assessee's Contention: The Petitioner argued that the notice under Section 148 was issued after four years, and therefore, the Revenue must demonstrate a failure to disclose material facts. The Petitioner contended that the AO's reasons for reopening were based on a change of opinion and bald assertions, without any tangible material. The original assessment under Section 143(3) had already considered the transactions in question. Revenue's Contention: The Revenue, through the AO's reasons recorded, believed that income chargeable to tax had escaped assessment because the Petitioner's purchase and sale of shares for ₹33,09,976 and ₹1,15,90,280 respectively, resulting in a long-term capital gain, were part of an accommodation entry and represented unexplained investment and bogus profit. The AO asserted that the entire transaction was a part of an accommodation entry made in collusion with an entry provider.

Which sections of the Income-tax Act were involved?

Section 148,Section 143(3),Section 10(38),Section 273A,Section 143(2),Section 142(1)

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 2014 OF 2022 Chanchal Bhagwatilal Gokhru, ] Age – 56 Years, ] R.N. 27, 2nd floor Rungata Bhavan, ] Sitaram Poddar Marg, ] 94/100 Fanaswadi, Mumbai-400002 ] …Petitioner Versus 1. Union of India, ] through Secretary, Ministry of Finance ] Department of Revenue, Room No.46, ] North Block ] New Delhi – 110 001 ] 2. Income tax Officer Ward 23(1)(6), ] Room No.203, 2nd floor, Earnest House, ] Nariman Point, Mumbai-400021 ] …Respondents … Mr. Rajendra for the petitioner. Mr. Akhileshwar Sharma a/w. Ms. Shilpa Goel for the respondents. …

CORAM : DHIRAJ SINGH THAKUR AND

KAMAL KHATA, JJ.

RESERVED ON : 18TH APRIL 2023.

PRONOUNCED ON : 4TH MAY 2023. J U D G M E N T [PER: KAMAL KHATA, J.] 1. Rule. Rule made returnable forthwith. Respondents Counsel waives service. 1/5 wp.2014.22.doc Sumedh SUMEDH NAMDEO SONAWANE Digitally signed by SUMEDH NAMDEO SONAWANE Date: 2023.05.04 17:07:26 +0530 CNR No : HCBM020090372022 Uploaded on - 04/05/2023 Downloaded on - 27/10/2026 22:45:38

2.

By this Petition under Article 226 of the Constitution, the Petitioner seeks a Writ of Mandamus to quash and set aside the impugned notice dated 26th March 2021 under section 148 of the Income Tax Act, 1961 (“the Act”) whereby the Respondent No. 2 proposed to reopen the assessment of the Petitioner for the Assessment Year (“AY”) 2014-15 as he had reason to believe that income chargeable to tax had escaped Assessment and all subsequent proceedings to the impugned notice. BRIEF FACTS: 3. The Petitioner had filed her return of income for AY 2014-15 on 28th July 2014. The Assessing Officer (“AO”) had passed an order u/s 143 (3) of the Act on 18th November 2016, whereby he added 1,07,18,922 to the total income on account of withdrawal ₹ of exemption claimed by the Petitioner u/s 10(38) of the Act and the Petitioner paid tax on the same. Thereafter, the Petitioner was also granted waiver of penalty for the AY 2014-15 on 31st January 2018 on application u/s 273A of the Act by the PCIT-18, Mumbai. 4. Evidently a notice u/s 148 of the Act dated 26th March 2021 is issued after a period of four years following which a return of income was filed by the Petitioner on 14th April 2021. This was followed by Notice u/s 143(2) dated 10th November 2021 and notice u/s 142(1) dated 15th November 2021 seeking details to 2/5 wp.2014.22.doc Sumedh Uploaded on - 04/05/2023 Downloaded on - 27/10/2026 22:45:38

which the Petitioner filed a response dated 24th November 2021 and objected to the re-assessment by communication dated 28th January 2022. The objections were disposed of on 11th February 2022. Another notice was issued on 25th February 2022 which led to filing of this Petition. 5. Since the impugned notice u/s 148 of the Act has been issued after the expiry of four years from the end of the relevant AY, Respondents have to show that the jurisdictional requirement is satisfied that there was failure to truly and fully disclose material facts as decided by this Court in Ananta Landmark (P) Ltd. v DCIT CC 5(3) Mumbai.1 6. We have examined the reasons recorded annexed to the Petition that are evidently premised on ‘seen from the assessment records’. The Assessment Officer (AO) records that the assessee claimed to have purchased shares of the penny stock scrips for a total of 33,09,976 and sold it for a consideration of ₹ 1,15,90,280/-. Therefore he held that the long term capital gain ₹ would be unexplained investment/income from other sources and not a capital gain as claimed by the assessee on the premise that entire transaction of purchase and sale of shares were a part of accommodation entry and represents unexplained investment 1 [2021] 131 taxmann.com 52 3/5 wp.2014.22.doc Sumedh Uploaded on - 04/05/2023 Downloaded on - 27/10/2026 22:45:38

made by assessee in cash to obtain an equivalent amount of bogus profit on sale of shares. 7. We find nothing to indicate failure to disclose any material fact. Upon examining the order u/s 143(3) we find that the AO has considered these very transactions and added 1,07,18,922 to ₹ the total income on which the Petitioner has already paid the tax. We find no substance in the AO’s reason to believe that income chargeable to tax has escaped assessment in as much as there is no mention of any tangible material that led to his conclusion. The entire process is triggered on a change of opinion as to the calculation of tax payable by the assessee. As stated hereinabove, it is evident that bald assertions of the transaction being “an accommodation entry made in collusion & connivance with the entry provider” are used to re-open the assessment. It is well settled judicial principal that, the true test of income chargeable to tax escaping assessment is whether there exists fresh “tangible material” on the basis of which appropriate conclusion is reached. In the absence of such material the reassessment proceedings would be invalid. This principle has been upheld by the Apex Court as well as the jurisdictional High Courts in various rulings. Furthermore, this Court has held that reconsideration of the 4/5 wp.2014.22.doc Sumedh Uploaded on - 04/05/2023 Downloaded on - 27/10/2026 22:45:38

material available at the time of original assessment proceedings tantamount to change of opinion and therefore invalid. 8. In view of the settled legal position and considering the facts of the present case, we pass the following order- i. The impugned notice dated 26th March 2021 issued by Respondent No.2 for AY 2014-15 are quashed and set aside and all action in furtherance thereto is prohibited; ii. Rule made absolute in above terms. No costs. [KAMAL KHATA, J.]

[DHIRAJ SINGH THAKUR, J.] 5/5 wp.2014.22.doc Sumedh Uploaded on - 04/05/2023 Downloaded on - 27/10/2026 22:45:38 Powered by TCPDF (www.tcpdf.org)

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