Bharatkumar Nihalchand Shah Vs ACIT (Gujarat High Court)
Gujarat High Court has set aside a notice issued by the Assistant Commissioner of Income Tax (ACIT) to reopen the income tax assessment of Bharatkumar Nihalchand Shah for the Assessment Year (AY) 2011-12. The court, in its ruling, found that the Assessing Officer (AO) had acted without proper application of mind, citing discrepancies in the reasons recorded for the reopening.
The petitioner, Bharatkumar Nihalchand Shah, had challenged the notice dated March 29, 2018, issued under Section 148 of the Income Tax Act, 1961, which sought to reassess his income for AY 2011-12.
Background: Reopening Notice and Stated Reasons
The petitioner had originally filed his return of income for AY 2011-12 on September 28, 2011, declaring a loss of ₹1,98,14,401. This return was processed under Section 143(1) of the Act. Almost seven years later, the impugned notice for reopening was issued.
The reasons recorded by the AO for reopening the assessment outlined information received from the Deputy Director of Income Tax (Investigation), Kolkata. This information stemmed from a survey conducted at the premises of the National Multi Commodity Exchange (NMCE), which allegedly uncovered a scheme where clients and members were involved in creating artificial trading volumes and suspected income tax evasion through the misuse of the NMCE platform. The investigation identified 85 entities that had booked “contrived losses.” Statements from alleged “entry operators” (Shri Devesh Upadhyay, Shri Pankaj Agarwal, Shri Prakash Jajodia, etc.) reportedly confirmed that shell companies were used to provide accommodation entries, including bogus losses or profits, to beneficiaries aiming to reduce their tax liabilities.
