Court quashes assessment notice lacking rational connection to income escapement.

The Court quashed the notice for reopening assessment for A.Y. 2011-12 and the order disposing objections. It found the reasons for reopening lacked a rational connection to income escapement, deeming it a fishing inquiry without valid grounds. The Court emphasized the necessity of tangible material supporting the belief of income evasion, citing a previous decision. Consequently, the petition was allowed, declaring the notice invalid and illegal.

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Issues:
Challenging impugned notice for reopening assessment for A.Y. 2011-12 and order disposing objections raised against reopening.

Analysis:
The petitioner challenged the notice dated 29/3/2018 for reopening assessment for A.Y. 2011-12 under Article 227 of the Constitution of India. The reasons for reopening were based on irregularities found by National Stock Exchange Ltd. in the business of M/s.Javerilal Oswal Commodities (P) Ltd. and other related entities. The petitioner contended that the transactions were genuine and the income was duly reflected in the balance sheet. The objections raised against the notice were rejected, leading to the present petition.

The petitioner argued that the reopening was based on the ground that the broker had squared up the transaction, but the amount was still receivable. Reference was made to a decision of the Bombay High Court in a similar case. On the other hand, the revenue contended that the reopening was based on information from the DGIT (Investigation) regarding irregularities at the National Stock Exchange Limited, leading to search and survey actions. The revenue maintained that the transactions were paper transactions without actual delivery of commodities, justifying the reopening.

The Court analyzed the reasons recorded for reopening and emphasized that mere verification or fishing inquiry is not permissible for reopening an assessment. Citing the Bombay High Court's decision, it highlighted the importance of tangible material forming the basis for a reason to believe that income has escaped assessment. The Court concluded that the reasons provided did not establish a rational connection to the belief of income escapement, indicating a fishing inquiry rather than a valid reason.

In light of the arguments and legal principles, the Court allowed the petition, quashing the impugned notice for reopening assessment for A.Y. 2011-12 and the order disposing of objections. The Court found the notice to be bad and illegal, lacking a valid basis for reopening the assessment.

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