Case Law Details
Primit Shambhuprasad Purani Vs ITO (Gujarat High Court)
Gujarat High Court held that reopening of assessment under section 148 of the Income Tax Act is liable to be quashed in as much as source of funds for purchasing crypto currency duly explained. Accordingly, order quashed.
Facts- The respondent AO issued notice u/s. 148A(b) of the Income Tax Act on 17.03.2022 on the ground that the petitioner has purchased crypto currency amounting to Rs. 19,00,000/- during the year under consideration and has failed to explain the source of investment before DDIT (Investigation). Notably, respondent AO without considering the reply of the petitioner passed the impugned order dated 30.03.2022 under section 148A(d) of the Act. By this petition under Article 226 of the Constitution of India, the petitioner has challenged notice dated 30.03.2022 issued under section 148 of the Income Tax Act, 1961.
Conclusion- Held that the impugned order dated 30.03.2022 passed under section 148A(d) of the Act is a classic example of order passed without application of mind by the respondent Assessing Officer ignoring the fact on record.
Held that it is not in dispute that the petitioner has filed bank statement of his father from whom he had borrowed funds to purchase crypto currency which is available on record and not disputed by the learned advocate for the respondent. Thus, we are therefore, of the opinion that impugned order dated 30.03.2022 passed under section 148A(d) of the Act is liable to be quashed and set aside and is hereby quashed and set aside. Consequently notice issued under section 148 of the Act of the even date would not survive and is accordingly quashed and set aside. Special Civil Application No.7305/2022 stands disposed off.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
1. Heard learned advocate Mr. Ravish D. Bhatt for the petitioner through video conference and learned Senior Standing Counsel Mr. Karan Sanghani for the respondent.
2. Rule returnable forthwith in both the petitions. Learned Senior Standing Counsel Mr. Karan Sanghani waives service of notice of rule on behalf of the respondent.
3. Facts are identical in both the petitions. However, Special Civil Application No. 6690/2023 is preferred because after this Court passed order dated 18.04.2022 whereby notice was issued and ad interim relief was granted by restraining the Assessing Officer from passing the assessment order and inspite of such interim order, the respondent Assessing Officer passed the assessment order under section 147 read with section 143(3) and 144B of the Act on 20.03.2023. Therefore, the same is challenged by way of Special Civil Application No.6690/2023.
4. For the sake of convenience, facts are recorded from Special Civil Application No.7305/2022.
5. By this petition under Article 226 of the Constitution of India, the petitioner has challenged notice dated 30.03.2022 issued under section 148 of the Income Tax Act, 1961 (For short “the Act”) for Assessment Year 20182019 along with order of even date under section 148A(d) of the Act.
6. Brief facts of the case are that the petitioner filed return of income for Assessment Year 2018-2019 on 28.03.2019 declaring income of Rs. 8,27,020/- which was processed under section 143(1) of the Act.
7. The respondent Assessing Officer issued summons under section 131(1A) of the Act on 14.07.2021 calling upon the petitioner for various details along with source of funds for purchase of crypto currency during the year under consideration.
8. The petitioner by reply dated 26.07.2021 provided necessary details and explained the source of funds for purchasing crypto currency by stating that he had borrowed funds from his father.
9. The petitioner thereafter was once again called upon to provide the details by issuing summons under the provisions of section 131(1A) of the Act on 01.10.2021 to provide the same information and details about its transactions in crypto currency and source of funds to purchase the same.
10. The petitioner again by reply dated 20.10.2021 provided all the information along with request to condone the delay as his son was sick and hospitalized and also explained the source of funds for purchase of crypto currency.
11. It appears that respondent Assessing Officer thereafter issued notice under section 148A(b) of the Act on 17.03.2022 for Assessment Year 20182019 on the ground that the petitioner has purchased crypto currency amounting to Rs. 19,00,000/- during the year under consideration and has failed to explain the source of investment before DDIT (Investigation).
12. The petitioner filed detailed reply dated 19.03.2022 which was uploaded on 24.03.2022 contending inter-alia that the petitioner has already filed return of income for the year under consideration and also explained the source of purchase of crypto currency by stating that he has made investment out of the funds received from his father Shri Shambhuprasad Purani who is assessed to income tax. The petitioner also provided the bank statement from which amount of Rs. 40,00,000/- was transferred to his account out of which the petitioner invested Rs. 20,00,000/-in mutual funds and purchased crypto currency of Rs. 19,00,000/-.
13. However, respondent Assessing Officer without considering the reply of the petitioner passed the impugned order dated 30.03.2022 under section 148A(d) of the Act observing as under:
“3. Therefore, after obtaining prior approval of the Pr.CIT-1, Vadodara; a notice u/s.148A(b) of the Act issued on 17/03/2022 to the asssessee to show cause as to why a notice under section 148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the A.Y. 2018-2019. In response to the notice u/s.148A(b) of the Act, the asssessee has submitted its reply dated 24/03/2022 received in ITBA. The asssessee has also submitted statement of bank account, mutual fund statement etc. The asssessee has submitted that the source of investment in crypto currency is out of redemption of mutual fund. The asssessee has stated that his father Shri Shambuprasad Purani (PAN-ACQPP6055J) is assessed to tax. From his bank account, Rs.40,00,000/- received. Out of this, the assessee has invested Rs.20,00,000/- in SBI Mutual Fund port folio No.15611133 and 15611901. The asssessee has invested Rs. 19,00,000/- in crypto out of redemption of mutual fund No.1561190. However, the assessee has not submitted the copy of bank account details and return of income of his father i.e. Shri Shambuprasad Purani (PAN- ACQPP6055J). Hence, the contentions of the asssessee found to be not correct.
4. In view of the facts and discussion made above, it is evident that in this case, there is information with the assessing officer which suggests that income amounting to Rs.19,00,000/- chargeable to tax has escaped assessment for AY 2018-19. Therefore, in view of this information and material available on record, discussion made above, especially the fact that the assessee had not filed any return of income for AY 2018-19, it is held that it is a fit case to issue a notice under section 148 of the Income Tax Act, 1961. This order is passed with the prior approval of the Principal Commissioner of Income Tax-1, Vadodara.”
14. Being aggrieved, the petitioner has preferred the present petition.
15. Learned advocate Mr. Ravish Bhatt for the petitioner submitted that inspite of providing information by the petitioner of the source of funds along with bank statement of his father from whom the petitioner had borrowed funds for purchase of crypto currency, respondent Assessing Officer has recorded incorrect fact in the impugned order passed under section 148A(d) of the Act to the extent that the petitioner has failed to provide the bank statement.
16. It was further submitted that incorrect statement with regard to non filing of the return by the petitioner is also made in contradiction to what is stated in para no.1 of the impugned order. It was therefore submitted that impugned order passed under section 148A(d) of the Act is contrary to the facts on record and is passed without application of mind and only with a view to cause harassment to the petitioner. It was therefore, prayed that the impugned order and consequential notice issued under section 148 of the Act may be quashed and set aside as the respondent Assessing Officer could not have arrived at the conclusion that it is a fit case to reopen the assessment.
17. Learned advocate Mr. Bhatt further submitted that this Court by order dated 18.04.2022 issued notice and granted ad interim relief in terms of para 8(D) by restraining the Assessing Officer from passing the assessment order and inspite of such interim order, the respondent Assessing Officer passed the assessment order under section 147 read with section 143(3) and 144B of the Act on 20.03.2023.
18. It was submitted that however respondent Assessing Officer did not make any addition considering the reply filed by the petitioner. It was submitted that however, the petitioner has preferred Special Civil Application No. 6690/2023 challenging the assessment order.
19. It was further submitted that as the impugned notice issued under section 148 of the Act is without jurisdiction and therefore, order dated 20.03.2023 is also liable to be quashed and set aside.
20. On the other hand learned Senior Standing counsel Mr. Karan Sanghani for the respondent could not controvert the contradictions recorded by the Assessing Officer in the order passed under section 148A(d) of the Act and also could not controvert the fact that the petitioner had filed return of income for the year under consideration as well as provided details of source of funds along with bank statement of the father of the petitioner.
21. It was therefore, submitted by learned Senior Standing counsel Mr. Sanghani that considering such facts the Assessing Officer has not made any addition while passing the assessment order. It was further submitted that the Assessing Officer was of the opinion that no addition is required to be made and assessment order is passed though there is stay order granted by this Court as no adverse order was to be passed against the petitioner.
22. In view of above facts and considering the material facts on record, it is evident that the impugned order dated 30.03.2022 passed under section 148A(d) of the Act is a classic example of order passed without application of mind by the respondent Assessing Officer ignoring the fact on record. Even on perusal of the order the same is self contradictory as is evident from para nos. 1 and 4 of the order. The respondent Assessing Officer has recorded in para no.1 that the petitioner has filed return of income however in para no.4 it is recorded that no return of income is filed. It is also not in dispute that the petitioner has filed bank statement of his father from whom he had borrowed funds to purchase crypto currency which is available on record and not disputed by the learned advocate for the respondent.
23. We are therefore, of the opinion that impugned order dated 30.03.2022 passed under section 148A(d) of the Act is liable to be quashed and set aside and is hereby quashed and set aside. Consequently notice issued under section 148 of the Act of the even date would not survive and is accordingly quashed and set aside. Special Civil Application No.7305/2022 stands disposed off.
24. In view of setting aside of order passed under section 148A(d) of the Act and notice under section 148 of the Act, subsequent assessment order dated 20.03.2023 and consequential notices issued by respondent Assessing Officer also would not survive. Accordingly Special Civil Application No.6690 of 2023 wherein said order dated 20.03.2023 is challenged is allowed and the assessment order as well as subsequent notices are hereby quashed and set aside. Special Application No. 6690/2023 stands disposed off.
25. Rule is made absolute to the aforesaid extent in both the petitions. No order as to costs.