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HARIKISHAN SUNDERLAL VIRMANI Versus DEPUTY COMMISSIONER OF INCOME TAX - CIRCLE - 2 (1) (1)

2016 (12) TMI 1558 - GUJARAT HIGH COURT

Validity of reopening of assessment - reopening of the assessment is on the information / data supplied by the office of the Principal Director of Income Tax (Investigation), Ahmedabad vide his confidential letter - non application of individual mind by AO - Held that:- The material on the basis of which the A.O. seeks to assume the jurisdiction under section 147 if the Act is the information received from the external source viz. the Principal Director of Income Tax (Investigation), Ahmedabad. .....

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the information received from other source, there cannot be any reassessment for the verification. - At this stage it is required to be noted that even in the reasons recorded, there is no allegation that there was any failure on the part of the assessee in not disclosing truly and fully material facts necessary for assessment. Under the circumstances, the assumption of the jurisdiction to reopen the assessment beyond the period of four years in exercise of powers under section 147 of the Ac .....

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By way of this petition under Article 226 of the Constitution of India, the petitioner has prayed for appropriate writ, order and/or direction to quash and set aside the impugned notice issued by the respondent, issued under section 148 of the Income Tax Act, 1961 (hereinafter referred to as the Act for short), by which the assessment for the A.Y. 2009-2010 is sought to be reopened in exercise of the powers under section 147 of the Act. 2.00. That the petitioner assessee filed its return of inco .....

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ers as well as computation of income was duly provided by the petitioner to the A.O. That thereafter the A.O. passed the assessment order under section 143(3) of the Act on 30/11/2010. That thereafter, the petitioner - assessee has been served with the impugned notice under section 148 of the Act dated 31/3/2016 by which the A.O. has sought to reopen the assessment for the A.Y. 2009-2010 alleging interalia that the income chargeable to tax for the A.Y. 2009-2010 has escaped assessment within the .....

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r dated 16/8/2016, the respondent disposed of the objections by observing that the objections raised by the petitioner - assessee are found to be not acceptable and rejected the same in totality. Hence, the petitioner has preferred the present petition under Article 226 of the Constitution of India challenging the impugned notice under section 148 of the Act as well as the impugned reassessment proceedings. 3.00. Mr.Soparkar, learned advocate appearing on behalf of the petitioner has vehemently .....

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ent has adopted Lavenshtein Distance Analysis or digit edit analysis utility, both of which are foreign to the Income Tax Act, 1961, to suggest that the distance of variation in case of the petitioner as per Lavenshtein Distance Analysis comes at 3 and in the opinion of the respondent if the distance is 1 then the mistake is genuine but if the same is 4 or 5 then it cannot be a genuine mistake but a deliberate change. It is submitted that therefore, even as per the opinion of the respondent hims .....

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ial facts. 3.03. Mr.Soparkar, learned advocate appearing on behalf of the petitioner has further submitted that the impugned reopening is only to carry out verification based on the information received from the investigation wing. It is submitted that the respondent has no reason to believe that the income has escaped assessment. It is submitted that as per the catena of decisions of the Hon'ble Supreme Court and this Court, merely to carry out verification by making fishy and roving inquir .....

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edings can be said to be on borrowed satisfaction of the investigation wing, which is not permissible. 3.05. In support of his above submission, Mr.Soparkar, learned advocate appearing on behalf of the petitioner has heavily relied upon the decision of the Division Bench of this Court in the case of Varshaben Sanatbhai Patel Versus Income Tax Officer, reported in (2015) 64 Taxmann.com 179 (Gujarat). Making above submissions and relying upon above decision, it is requested to allow the present pe .....

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Guinness Securities Limited and the client code of the assessee with the aforesaid broker was WW/2647. It is submitted that to examine the genuineness of the modification of the client s code in case of the assessee, by applying Lavenshtein Distance Analysis or digit edit analysis utility, in those cases where the assessee is original client and the transactions were carried out from the assessee s client code, then subsequently client code was modified to other client and the total and the tota .....

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nsonance with the provision of section 148 read with section 148 of the Act. Therefore, it is requested to dismiss the present petition. 5.00. Heard the learned advocates appearing on behalf of the respective parties at length. 5.01. At the outset, it is required to be noted that the impugned notice under section 148 of the Act to reopen the assessment in exercise of the power under section 147 of the Act, has been issued beyond the period of four years. Therefore, considering the proviso to sec .....

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not disclosing truly and fully material necessary for the assessment. 5.02. The reasons recorded to reopen the assessment are as under :- 2. Reasons for reopening of the assessment - A.Y. 2009 reg. Assessee had e-filed his return of income for the Asstt. Year 2009-2010 on 30.09.2010 declaring therein total income of ₹ 2,09,39,600/-. Subsequently, the case was selected in CASS within the meaning of section 143(3) of the act. Assessment proceedings was completed u/s. 143(3) of the Act on 30/ .....

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of the SEBI the client code of the assessee with the aforesaid broker was WW/2647. In order to verify the genuineness of the modification of client code in the case of the assessee, by applying Lavenshtein Distance Analysis or digit edit analysis utility, in those cases where the assessee is original client and transactions were carried out from assessee s client code then subsequently client code was modified to other client the details of such case are as under :- OC OCC MC MCC Distance as per .....

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reasonably argued that the OCC (Original Client Code) may have been typed wrongly by mistake. Similarly, if the number of digits changed is more say 4 or 5,it cannot be genuine mistake buyt a deliberate change. To this extent, Levenshtein Distance Analysis or digit edit analysis act as a clear indicator for genuineness in client code modification. In short, the longer the distance (i.e. number of digits changed), the lesser the chance of genuineness. 3. Hence, the editing of client code above it .....

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al Director of Income Tax (Investigation), Ahmedabad and the information received from the Principal Director of Income Tax (Investigation), Ahmedabad vide his confidential letter dated 8/3/2016. From the information received, it appears that though the client code of the assessee with the broker - Guinness Securities Limited was WW/2647, modified client code was found to be WW/2108 and therefore, to verify the genuineness of the modification of the client code, by applying Lavenshtein Distance .....

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y and correct facts / material necessary for assessment. From the reasons recorded, it appears that the impugned reopening proceedings are on the borrowed satisfaction. No independent opinion is formed. On the plain reading of the reasons recorded what emerges is that the A.O. on considering the information received from the Principal Director of Income Tax (Investigation), Ahmedabad, reassessment proceedings have been initiated on the ground that the income escaped assessment. However, there is .....

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