High Court upholds Income Tax Act order for AY 2016-17. Disputed facts to be resolved through assessment machinery.

The High Court dismissed the writ petitions seeking to quash the order and notice under the Income Tax Act for the Assessment Year 2016-17. The court emphasized that disputed factual matters should be resolved through the assessment machinery provided by the Act, rather than through writ jurisdiction under Article 226 of the Constitution. The court refrained from assessing the merits of the controversy, leaving it for the Assessing Officer to decide independently.

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Issues:
1. Quashing of order and notice under Income Tax Act, 1961 for AY 2016-17.
2. Allegations of receiving accommodation entries through dummy demat accounts.
3. Dispute over the purchase of 32000 shares of TVS Motor Company Ltd.
4. Assessment of Short Term Capital Gain (STCG) claimed on the sale of shares.
5. Initiation of re-assessment proceedings under Section 148 of the Act.
6. Genuineness of transactions and lack of contemporaneous documents.
7. Similar transactions by another party leading to connected writ petition.
8. Contention on limitation for issuing notice under Section 148.
9. Consideration of responses before passing impugned orders.
10. Jurisdiction of High Court under Article 226 of the Constitution.

Analysis:

1. The petitioner sought the quashing of an order and notice under the Income Tax Act, 1961 for the Assessment Year 2016-17. The petitioner, as the Karta of a Hindu Undivided Family, denied involvement with entities providing accommodation entries through dummy demat accounts.

2. Allegations arose from a Show Cause Notice indicating the receipt of shares worth Rs. 94,81,600 from a dummy demat account. The petitioner disputed these claims but admitted to trading shares through the same account, leading to suspicions of accommodation entries.

3. The dispute centered around the purchase of 32000 shares of TVS Motor Company Ltd. The petitioner claimed Short Term Capital Gain on the sale of these shares, which the Assessing Officer deemed fit for re-assessment under Section 148.

4. The petitioner argued that the transaction was genuine as the shares were listed on the Stock Exchange and sold through a legitimate platform. However, the Revenue contended that the purchase from an alleged accommodation entry provider lacked substantiating documents.

5. The court noted the absence of contemporaneous documents supporting the share purchase and highlighted the petitioner's admission of transactions with the alleged accommodation entry provider. A connected writ petition involving similar transactions was also considered.

6. The court rejected the limitation contention and emphasized the consideration of petitioner responses before issuing impugned orders. The judgment referenced previous cases to support the decision not to interfere with the re-assessment proceedings.

7. Ultimately, the court dismissed the writ petitions, stating that disputed factual matters should be addressed through the assessment machinery provided by the Income Tax Act, rather than through writ jurisdiction under Article 226 of the Constitution. The court clarified that it did not assess the merits of the controversy, leaving the matter for the Assessing Officer to decide independently.

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