2023 (11) TMI 544 - HC - Income Tax

Section 147 reopening assessment quashed as department failed to justify reopening despite non-reply from petitioner

The Bombay HC quashed a section 147 reopening assessment, holding that the department failed to justify reopening despite petitioner's non-reply. The ... Validity of reopening of assessment u/s 147 - Eligible income to be brought to tax - onus to prove - HELD THAT:- Even if there was no reply filed by petitioner the onus is on department to justify the reopening. If one considers the material relied upon by respondents to reopen, there are two buy and two sell. What has been brought has been sold or what has been sold only has been brought. It is well settled that only the net income from the buy and sell transactions can be brought to tax in petitioner’s hand and not the entire sum as done in this case. There is no attempt to even apply their mind as to how, when there are contra entries of buy and sell, both amounts could be added to say escapement of income. Therefore, in this case, considering the figures as given in the reasons for reopening, net income from the buy and sell transactions which can be brought to tax in petitioner’s hand and not the entire amount. In the petition, petitioner has stated that this net income also is less than the maximum amount which is not chargeable to income tax for the assessment year in question and accordingly no income chargeable to tax has escaped assessment in petitioner’s hand. There is no denial in the affidavit in reply. Thus the issue of the impugned notice under section 148 of the Act, the passing of the impugned assessment order and the issue of the impugned demand notice and the impugned penalty notice and after going through the same and examining the question of legality thereof quash, cancel and set aside Issues involved:The petition challenges the legality of various actions taken by the revenue authority, including issuing notices, reopening assessment, passing assessment orders, and issuing demand and penalty notices under the Income Tax Act, 1961.Reopening of Assessment:The respondent issued notices under Section 148 of the Act, claiming that the petitioner's income for the assessment year 2014-15 had escaped assessment. The impugned order held that there was an escapement of income due to transactions on the National Spot Exchange Ltd. (NSEL). However, the petitioner argued that only the net income from the transactions should be taxed, not the entire sum as done by the respondent. The court found that the net income from the buy and sell transactions amounted to Rs. 77,280, which should be taxable, not the full amount of Rs. 98,04,340.Faceless Assessment Procedure:The case was assigned to the National Faceless Assessment Centre for completion of assessment under Section 144B of the Act. Despite delays in filing replies to notices, the petitioner's Chartered Accountant eventually responded, disputing the amount to be treated as income. The assessment order was passed, adding the full amount of Rs. 98,04,340 as undisclosed income, leading to the issuance of demand and penalty notices.Judicial Review and Decision:The petitioner approached the court through a Writ Petition, challenging the assessment order and related notices. The court noted that the respondent failed to justify the reopening adequately and did not consider that only the net income from transactions should be taxed. As the net income was below the non-taxable threshold, the court ruled in favor of the petitioner, quashing the impugned letter, order, notices, and assessment related to the assessment year 2014-15.Conclusion:The court allowed the petition, issuing a writ to quash the impugned actions by the revenue authority. The petition was disposed of with no order as to costs.