AKSHAR PROPERTIES vs. ASST. COMMISSIONER OF INCOME TAX CIRCLE 27(1) AND ORS

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WP/3303/2022HC BombayHCBM01011995202212 December 2023Author: HON'BLE SHRI JUSTICE K.R. SHRIRAM,HON'BLE JUSTICE DR. NEELA KEDAR GOKHALE3 pages
AI SummaryRemanded

What did the High Court hold?

The High Court quashed and set aside the order dated January 27, 2022, by which the Petitioner's objections were rejected. The matter was remanded for de novo consideration. The Court directed that within three weeks, the Petitioner be provided with copies of all documents and information received from the DDIT (Inv.), 4(1), Thane, which were relied upon in the reasons for reopening. Redactions are permitted for portions not pertaining to the Petitioner. Within two weeks of receiving these documents, the Petitioner is to file a comprehensive reply. The Assessing Officer is to pass a reasoned order after giving the Petitioner a personal hearing at least five working days in advance. The assessment order must be passed on or before March 31, 2024. The Court explicitly stated that no observations were made on the merits of the matter.

What were the facts?

The Petitioner, Akshar Properties, is challenging a notice dated March 30, 2021, issued under Section 148 of the Income Tax Act, 1961, for Assessment Year 2017-18. The notice was issued based on information from the DDIT (Inv.), 4(1), Thane, indicating that a survey on December 10, 2020, revealed the assessee took unsecured loans from shell companies providing accommodation entries and paid interest of Rs. 17,97,000/- on these alleged bogus loans. The Petitioner contends that the documents relied upon by the Revenue to form the reasons for reopening have not been provided, hindering their ability to respond effectively. The Petitioner denies taking such loans or paying interest on bogus loans. The Assessing Officer rejected the Petitioner's objections, stating that establishing escapement of income was not required at the reopening stage.

What were the issues?

1. Whether the Petitioner is entitled to be provided with the documents/information relied upon by the Revenue in forming the reasons to believe that income has escaped assessment, to enable an effective response to the notice issued under Section 148 of the Income Tax Act, 1961. Assessee's Contentions: The Petitioner argued that while the Assessing Officer may not need to establish escapement of income at the reopening stage, providing the documents that formed the basis of the belief is essential for the assessee to effectively respond and explain that there was no escapement of income. The Petitioner stated that the objections were rejected on specious grounds and that the details sought by the respondents were necessary for a proper response. Revenue's Contentions: The Revenue, through the Assessing Officer's order rejecting objections, contended that at the time of reopening, the Assessing Officer was not required to establish escapement of income. The judgment does not record specific arguments from the Revenue beyond this implicit stance.

Which sections of the Income-tax Act were involved?

Section 148,Section 133A,Section 147

AI-generated summary — verify with the full judgment below

1/3 915-wp-3303-22.doc IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO. 3303 OF 2022 Akshar Properties

….Petitioner V/s. Asst. Commissioner of Income Tax Circle 27(1) & Ors.

....Respondents ---- Ms Ritika Agarwal a/w Ms Ayesha Ansari i/b Acelegal for Petitioner. Mr. Vipul Bajpayee for Respondents. ---- CORAM : K. R. SHRIRAM & Dr. NEELA GOKHALE, JJ.

DATED : 12th DECEMBER 2023 P.C. : 1 Petitioner is impugning a notice dated 30th March 2021 issued under Section 148 of the Income Tax Act 1961 (the Act), for AY-2017-18 on various grounds and in particular that the documents / information relied upon by respondents in forming the reasons to believe for escapement of income, has not been made available to petitioner. 2 The reasons for reopening reads as under: “The DDIT (Inv.), 4(1), Thane has informed that a survey u/s 133A was conducted in the case of Akshar Group on 10.12.2020. During the survey, it has been identified that the assessee has taken unsecured loans from shell companies providing accommodation entries. During the year, the assessee has made payment of interest of Rs. 17,97,000/- against the bogus unsecured loans availed in previous years. Thus, the assessee has reduced its income by claiming interest expenses on bogus loans. Hence, income chargeable to tax amounting to Rs. 17,97,000/- has escaped assessment for F.Y. 2016-17 relevant to A.Y. 2017-18 by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, for A.Y. 2017-18. I have reason to believe that an amount of Rs. 17,97,000/- has escaped assessment for A.Y. 2017-18, within the Meera Jadhav MEERA MAHESH JADHAV MEERA MAHESH JADHAV Date: 2023.12.16 15:05:50 +0530

2/3 915-wp-3303-22.doc meaning of provisions of section 147 of the Income Tax Act, 1961, due to failure on the part of the assessee to disclose true and correct income.” 3 Ms Agarwal states that though, objections were filed and objections have been rejected on specious grounds, that details sought by respondents are not required to be provided at the stage when respondents had material with them to arrive at a belief that income has escaped assessment at the time when notice under Section 148 was issued. If petitioner is made available with those documents / information based on which the officer has formed an opinion that there was escapement of income, it would help petitioner to effectively respond and also explain that there was never and there cannot be any escapement of income. 4 In the order rejecting petitioner’s objection, the officer simply states that at the time of reopening, the Assessing Officer was not required to establish escapement of income. The officer may be correct but if, in the reasons to reopening assessment reliance has been placed on documents to suggest that petitioner has taken unsecured loan from shell companies providing accommodation entry and paid interest of Rs.17,97,000/- against bogus unsecured loan availed in previous years, the least an Assessing Officer could do is to make available those documents to petitioner, particularly when petitioner is denying that petitioner has taken any unsecured loans from shell companies or payment of interest against bogus unsecured loan. Meera Jadhav

3/3 915-wp-3303-22.doc 5 Therefore, we hereby quash and set aside the order dated 27th January 2022 passed by respondents rejecting petitioner’s objections and remand the matter for denovo consideration. Within three weeks from today petitioner shall be provided copies of all such documents / information indicating those received from DDIT (Inv.), 4(1), Thane, relied upon in the reasons for reopening. If any information received from DDIT (Inv.), (4(1), Thane, does not pertain to petitioner, such portion can be redacted before making the documents available to petitioner. Within two weeks of receiving the documents, petitioner shall file comprehensive reply to the notice for reopening. The Assessing Officer shall pass a reasoned order in accordance with law and before passing any order, a personal hearing shall be given to petitioner, notice whereof shall be communicated at least five working days in advance. The assessment order shall be passed on or before 31st March 2024. 6 Petition disposed. 7 We clarify that we have not made any observations on the merits of the matter.

(Dr. NEELA GOKHALE, J.) (K. R. SHRIRAM, J.) Meera Jadhav

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