Karan Maheshwari Vs ACIT (Bombay High Court)
Reassessment Quashed for Lack of Nexus Between Investor and Alleged Mutual Fund Irregularities; Section 148A Reopening Set Aside for Non-Disclosure of Material to Taxpayer; Income Tax Reassessment Struck Down for Vague Allegations and Non-Application of Mind; Reassessment Notices Quashed for Using Withheld Evidence Against Taxpayer; No Reassessment Permissible Without Live Link Between Information and Escapement of Income
The Bombay High Court disposed of the writ petition at the admission stage after noting that pleadings were complete. The petition challenged a show cause notice dated 20 August 2022 issued under Section 148A(b) of the Income Tax Act, 1961, the order dated 30 September 2022 passed under Section 148A(d), and subsequent reassessment notices dated 30 September 2022 and 7 October 2022 issued under Section 148 for Assessment Year (AY) 2016–17.
The petitioner is an individual investor engaged in investments in shares, securities, and mutual funds. In June 2015, following a public announcement by JM Financial Mutual Fund regarding declaration of dividends under the JM Balanced Fund (Direct) Quarterly Dividend Option, the petitioner invested ₹1.10 crore on 17 June 2015 and subsequently ₹6 crore on 25 August 2015. During the relevant previous year, the petitioner received dividends aggregating to ₹3.41 crore on three occasions. On 31 March 2016, the petitioner redeemed the units for ₹3.61 crore, resulting in a short-term capital loss. After considering dividend income and capital loss, the petitioner declared total income of ₹66.44 lakh for AY 2016–17 and filed the return on 4 August 2016.
