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Vishal Exports Overseas Ltd. Versus Deputy Commissioner Of Income Tax (OSD)

2015 (10) TMI 1767 - GUJARAT HIGH COURT

Reopening of assessment - notice under section 148 issued beyond a period of four years from the end of the relevant assessment year - petitioner has withdrawn ₹ 2,54,00,000/- from the bank accounts maintained by it in cash and has not explained the utilisation thereof - Held that:- The sole basis for reopening the assessment is that the petitioner assessee has withdrawn an amount of ₹ 2,54,00,000/- in cash and has not explained the utilisation. Thus, cash withdrawals from bank accou .....

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CIVIL APPLICATION NO. 3864 of 2015 - Dated:- 8-9-2015 - MS. HARSHA DEVANI AND MR. A.G.URAIZEE, JJ For the Petitioner : Mr SN Soparkar, Senior Advocate And Mr B S Soparkar, Advocate For the Respondent : Mr Nitin K Mehta, Advocate JUDGMENT PER : HONOURABLE MS.JUSTICE HARSHA DEVANI) 1. Rule. Mr. Nitin Mehta, learned senior standing counsel waives service of notice of rule on behalf of the respondent. Having regard to the facts of the case and the controversy involved in the present case, which lies .....

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total loss of ₹ 92,92,03,429/-. The return was selected for scrutiny and subsequently, the Assessing Officer framed assessment under sub-section (3) of section 143 of the Income tax Act, 1961 (hereinafter referred to as the Act ), on 16.12.2009 whereby he assessed the total income of the petitioner at ₹ 1,75,39,35,864/- as against the total loss of ₹ 92,92,03,429/- as per the return income. Accordingly, the assessee was held liable to pay tax of ₹ 78,38,78,939/-. Subsequ .....

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the respondent to drop the reassessment proceedings. By an order dated 16.2.2015, the respondent rejected the said objections. Being aggrieved, the petitioner has filed the present petition. 3. Mr. S. N. Soparkar, Senior Advocate, learned counsel for the petitioner invited the attention of the court to the reasons recorded for reopening the assessment to submit that the same do not meet with the requirements of section 147 of the Act, inasmuch as, on a plain reading of the reasons, it is evident .....

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the Act by issuing notice under section 148 thereof on the part of the Assessing Officer is without any authority of law and as such, the impugned notice is required to be set aside. 4. On the other hand, Mr Nitin Mehta, learned senior standing counsel for the respondent opposed the petition by submitting that on the basis of the information received from the office of the Deputy Director of Income Tax (Investigation), based upon a report of suspicious transaction attempted to be made by Mehta .....

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4,00,000/-, the petitioner has not been able to justify the reason for such cash withdrawals and utilisation to the Deputy Director of Income Tax (Investigation) during the course of investigation. It was submitted that it is for this reason that the Assessing Officer has formed a belief that income to the extent of ₹ 2,54,00,000/- has escaped assessment within the meaning of the said expression, as envisaged under section 147 of the Act. The attention of the court was invited to the lette .....

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has reiterated that it has been held by various courts, including the Supreme Court time and again that notice for reopening must be judged on the basis of the reasons recorded by the Assessing Officer. Through an affidavit-in-reply, he cannot improve upon such reasons. On facts, the court held that in that view of the matter, the attempt on the part of the Assessing Officer to contend through an order disposing of objections of the petitioner and his affidavit-in-reply that the assessee having .....

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r. There is a mere suspicion in the mind of the assessing officer and the notice under section 147/148 has been issued for the purpose of verification and for clearing the cloud of suspicion. The reasons to believe recorded do not show as to on what basis the Assessing Officer has formed a reasonable belief that the said amount of ₹ 2,00,000/- had escaped assessment. It is apparent the Assessing Officer suspects that the income has escaped assessment. However, mere suspicion is not enough. .....

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tantial evidence and not on mere suspicion, gossip or rumour. The "reason to believe" recorded in the case do not refer to any material that came to the knowledge of the Assessing Officer whereby it can be inferred that the Assessing Officer could have formed a reasonable belief that the said amount had escaped assessment. The purported belief that income has escaped assessment is not based on any direct or circumstantial evidence and is in the realm of mere suspicion. The requirement .....

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permissible. It was contended that the reasons must ex facie show that income has escaped assessment and that in the present case, the reasons do not disclose any escapement of income. 6. Before adverting to the merits of the case, reference may be made to the reasons recorded by the Assessing Officer for reopening the assessment for assessment year 2007-08, which read thus :- In this case, information has been received from the office of the DDIT (Inv.) Unit-II(2), Ahmedabad vide the letter No. .....

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nternational Limited (iii) M/s. Krishna Trading (iv) M/s. Sai Enterprise and (v) M/s. Laxmi Enterprise. Credits to the tune of ₹ 101.05 Crore were received through RTGS and by way of clearing cheques deposited in the accounts which was followed by cash withdrawals to the tune of approximately 90% of the total credits in the accounts aggregating ₹ 94.75 Crore took place in the same period. M/s. Vishal Exports Overseas Limited, Ahmedabad is an associate of M/s.IPOG International and M/ .....

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₹ 2.54 crores. However, the A.R. of the assessee company could not justify the reason for cash withdrawal and its utilization to the DDIT (Inv.) during the course of investigation. In view of the above, the assessee has suppressed material fact about its income. In view of the above I have reason to believe that income to the extent of ₹ 2.54 Cr. has escaped assessment within the meaning of section 147 of the Act. I am satisfied that this is a fit case for issuing notice u/s.148 of .....

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on are satisfied. 8. Section 147 of the Act provides that if the Assessing Officer, has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceeding under that section, or recompute the loss or the depreciation allowance or .....

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therein is that certain information has been received from the Deputy Director of Income Tax (Investigation) regarding suspicious transactions attempted to be made by Mehta Group of individual entities. It is further recorded that during the period between April 2006 and November, 2006 there were large cash turnovers in five bank accounts of the five parties named therein and that credit to the tune of ₹ 101.05 crores were received through RTGS and by way of clearing cheques deposited in .....

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Director of Income Tax (Investigation) during the course of investigation. On the basis of the aforesaid reasons recorded by her, the Assessing Officer has come to the conclusion that the assessee has suppressed material facts and that she has reason to believe that income to the tune of ₹ 2,54,00,000/- has escaped assessment within the meaning of such expression, as envisaged under section 147 of the Act.. 10. Thus, from the reasons recorded it is manifest that according to the Assessing .....

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