Shrenik Sudhir Vimawala Vs ACIT (Gujarat High Court)
In a significant judgment, the Gujarat High Court has quashed the order under clause (d) of Section 148A and the notice issued under Section 148 of the Income Tax Act, 1961, in the case of Shrenik Sudhir Vimawala Vs ACIT. This decision underscores the imperative of the Assessing Officer (AO) to duly consider the objections of the assessee before proceeding with reassessment notices for the Assessment Year (AY) 2018-19.
The case revolved around the AO’s intention to reopen the assessment for AY 2018-19, based on alleged non-disclosure of transactions connected with the Social Cooperative Bank Ltd. and Union Bank of India. The AO claimed an escapement of income amounting to Rs.1,80,41,71,133. The assessee, however, filed detailed objections under clause (b) of Section 148A, disputing the AO’s allegations and providing substantial documentary evidence to support his claims.
Despite the assessee’s objections, the AO issued a final order under clause (d) of Section 148A, asserting that the submissions were not acceptable without providing a detailed examination of the assessee’s objections. This act by the AO was challenged in the Gujarat High Court under Article 226 of the Constitution of India.
The High Court noted that the AO had failed to consider the assessee’s objections in their true sense, which is a statutory obligation under Section 148A of the Income Tax Act. The Court emphasized that the process of considering the assessee’s objections is not a mere formality but a quasi-judicial function that requires proper application of mind and reasoning.
The judgment delivered by the Gujarat High Court in Shrenik Sudhir Vimawala Vs ACIT serves as a crucial reminder of the procedural safeguards provided to taxpayers under the Income Tax Act. It highlights the necessity for the AO to meticulously examine and consider the assessee’s objections before deciding to issue a notice under Section 148. By quashing the order and notice and remanding the matter back to the AO for fresh consideration, the Court has reinforced the principles of fairness and due process in the administration of tax laws. This ruling not only protects the rights of the assessee but also ensures that the powers of reassessment are exercised judiciously and in accordance with the statutory provisions.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
By this writ application under Article 226 of the Constitution of India, the writ applicant has prayed for the following reliefs:
“(a) quash and set aside the impugned notices and order at Annexure-A1, A2 and A3 to this petition.
(b) pending the admission, hearing and final disposal of this petition, to stay implementation and operation of the order and notice at Annexure – A2 and A3 to this petition and stay further proceedings for assessment for A.Y. 2018-19;
(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.”
2. On 26th April 2022, this Court passed the following order:
“1. We have heard Mr. Bandish Soparkar, the learned counsel appearing for the writ applicant for quite some time. We seek assistance of Mr. M.R.Bhatt, the learned Senior Counsel, who would be appearing for the Revenue.
2. Prima facie, the case of the department appears to be that for the Assessment Year 2018-19, the writ applicant had not disclosed about the transactions in his return of income connected with the Social Cooperative Bank Ltd.. In the reasons assigned, we find reference of three bank accounts maintained with the Social Co-operative Bank Ltd. and three bank accounts maintained with the Union Bank of India. So far as the Union Bank of India is concerned, there are hardly any transactions but, there are huge transactions so for as the Social Co-operative Bank Ltd. is concerned. Out of the three bank accounts, according to the writ applicant, one of the bank accounts maintained with the Social Cooperative Bank Ltd. is that of the HUF and the HUF is being assessed independently. Even if one of the bank accounts is that of the HUF still the question is how do we determine whether in the original return all the transactions connected with the Social Co-operative Bank Ltd. were disclosed in the return. The argument is that in the return, the assessee need not disclose anything about his bank or the bank details. In the return, he has to show the transactions, the profit and loss account etc.
3. We would like to know from both, the assessee as well as the Revenue, whether all the transactions for the relevant Assessment Year 2018-19 were with respect to only this particular bank or there are any other accounts also of the writ applicant with other banks.
4. We request Mr. Bhatt, the learned Senior Counsel, to seek appropriate instructions in this matter and revert to us on 02.05.2022.
5. Post this matter on 02.05.2022.
6. One set of the entire paper book shall be furnished to Mr. Bhatt at the earliest.
7. On the returnable date, notify this matter on top of the Board.”
3. We have heard Mr. S. N. Soparkar, the learned Senior Counsel appearing for the writ applicant and Mr. M. R. Bhatt, the learned Senior Counsel assisted by Mr. Karan Sanghani, the learned counsel appearing for the Revenue.
4. As noted in our order dated 26th April 2022, the reason why the Assessing Officer wants to reopen the assessment for the relevant year 2018-19 is that the writ applicant – assessee had not shown the transactions with respect to the Social Cooperative Bank Limited. This is evident from para 3 of the notice issued under clause (b) of Section 148A of the Income Tax Act, 1961 (for short, “the Act, 1961”), wherein the following has been stated:
