Nimesh Maheshbhai Shah HUF Thro Nimesh Maheshbhai Shah Vs ITO (Gujarat High Court)
Summary: The Gujarat High Court quashed the notice dated 31.03.2021 issued under section 148 of the Income Tax Act, 1961 for AY 2016-17 and the consequential order dated 13.12.2021 rejecting the assessee’s objections. The Court found that the Assessing Officer had relied primarily on information available on the Insight Portal regarding alleged bogus long-term capital gains and had failed to independently examine the material already available on record in the assessee’s case.
The Court noted that the assessee had disclosed the purchase and sale of shares, supported by contract notes, broker ledger, bank statements and demat records. The assessee had purchased 60,000 shares of Kushal Ltd. and sold 1,05,465 shares for Rs.1,09,98,307/-, while the remaining shares were disclosed as closing investments.
Relying on the principles laid down in Pr. CIT v. Meenakshi Overseas (P.) Ltd. and Harikishan Sunderlal Virmani v. DCIT, the Court held that information received from another agency cannot, by itself, justify reassessment unless the Assessing Officer considers that information together with the assessee’s material and independently forms the requisite belief that taxable income has escaped assessment.
The Court therefore held that the reassessment proceedings were founded on “borrowed satisfaction” and that the Assessing Officer could not assume jurisdiction merely and solely on the basis of Insight Portal information without forming an independent opinion. The impugned notice and order rejecting objections were consequently quashed and set aside.
