Mehul Ravjibhai Surani Vs Assessment Unit Income Tax Department & Anr. (Gujarat High Court)
Summary: In Mehul Ravjibhai Surani vs. Assessment Unit Income Tax Department & Anr., the Gujarat High Court addressed the legality of an assessment order under Sections 147 read with 144B of the Income Tax Act for AY 2018-19. The petitioner, an individual taxpayer, had declared an income of ₹3.23 lakh and reported a loss of ₹19.88 lakh on the sale of shares of Kushal Limited. The case was reopened on suspicion of escaped income, transferred to the National Faceless Assessment Unit, and the petitioner submitted detailed documentary evidence and judicial precedents to substantiate the genuineness of transactions. Despite this, the Assessing Officer (AO) issued a draft assessment order proposing an addition of ₹56.88 lakh as unexplained investment under Section 69 and, without considering the taxpayer’s submissions, finalized the same order. A demand notice of ₹83.99 lakh was issued, exceeding the proposed addition. The petitioner challenged the assessment order, arguing it violated principles of natural justice because the AO failed to consider or address the detailed replies. The High Court observed that the AO admitted ignoring the submissions, claiming them irrelevant, a rationale the Court found unacceptable. Concluding that the assessment order was passed in clear breach of natural justice, the Court quashed and set aside the order, remanding the matter to the AO to pass a fresh de novo assessment after considering the taxpayer’s reply and providing a hearing within 12 weeks. This judgment reinforced that taxpayers’ submissions cannot be mechanically ignored and that proper consideration of evidence and arguments is mandatory under the law.
