TMI Blog2020 (1) TMI 695X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner had taken all other course such as filing of objection and invoking the writ jurisdiction of this Court. If this Court interferes at the initial stage of reopening proceedings, certainly, it will amount to stay of proceedings for recovery of tax. Obviously, learned counsel for the petitioner even though had placed facts of the case, but on examination, we do not find that the present case can be termed as an exceptional case for interference at initial stage of a reopening proceedings. Even if an order is passed after reopening pursuant to the notice, dated 19.03.2019, the petitioner will have a statutory remedy as provided in the IT Act. we are of the considered opinion that the prayer sought for by the petitioner in the instant writ petition cannot be acceded to and Writ Petition may not be entertained. Accordingly, the Writ Petition stands dismissed. See AUTHORIZED OFFICER, STATE BANK OF TRAVANCORE AND ANOTHER VERSUS MATHEW K.C. [ 2018 (2) TMI 25 - SUPREME COURT] - We are of the considered opinion that the prayer sought for by the petitioner in the instant writ petition cannot be acceded to and Writ Petition may not be entertained - WRIT PETITION No.17952 OF 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , which is at Page No.20 of the material papers, while acknowledging receipt of the notice, asked to provide reasons to believe that any income chargeable to the tax had escaped assessment for the assessment year 2012-13. The said request was adhered to by the Assistant Commissioner of Income Tax vide communication contained in F.No.ACIT-1(1)/Vsp(AGVPK0314L/2019-20, letter dated 09.08.2019. The reason for reopening is reproduced hereunder: t is found that the assessee Sri Naval Kishore Khaitan has sold shares of the paper company M/s Ecowave Infotech limited and received an amount of ₹ 19,53,899.55/- during the F.Y. 2011-12 relevant to A.Y. 2012-13. Enquiry by the investigation wing Kolkata has revealed that the said company M/s Ecowave Infotech limited is established to provide accommodation entry of prearranged bogus long term capital gain to various beneficiaries and the assessee is one of such beneficiaries. The assessee, having received ₹ 19,53,899.55/- out of sale of shares of the company M/s Ecowave Infotech Limited has neither declared any capital gain nor reflected the said transaction in his return of income for the A Y 2012-13 . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rgued that on a true and proper construction of the provisions 147, 148, 149 and 151, it is imperative that after expiry of four years, the Assessing Officer (AO) in his reasons should firstly state in categorical terms that income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return or to disclose fully and truly all material facts necessary for his assessment and further in specific terms mention that the escaped income is likely to be ₹ 1 lakh or more so that the Chief Commissioner or the Commissioner may record his satisfaction. The sanctioning authority must be aware that he has exercised the power of extended period of limitation under Section 149(1)(b) of the IT Act. Further, Section 149(1)(b) postulates that no notice under Section 148 shall be issued for the relevant assessment year if four years, but not more than six years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more for that year. Therefore, it is imperative that the AO, in his reasons, should a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r clause (b) of section 147 are satisfied, the Income-Tax Officer has no jurisdiction to issue a notice under section 148. From the report submitted by the Income-Tax Officer to the Commissioner, it is clear that he could not have had reasons to believe that by reason of the assessee s omission to disclose fully and truly all material facts necessary for his assessment for the accounting year in question, income chargeable to tax has escaped assessment for that year ; nor could it be said that he, as a consequence of information in his possession, had reasons to believe that the income chargeable to tax has escaped assessment for that year and the Income-Tax Officer had any material before him which could satisfy the requirements of either clause (a) or clause (b) of section 147. Therefore, he could not have issued a notice under section 148. Further, the report submitted by him under section 151(2) does not mention any reason for coming to the conclusion that it is a fit case for the issue of a notice under section 148, the Hon ble Supreme Court was of the opinion that the Commissioner has mechanically accorded permission. He did not himself record that he was satisfied that this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever held or purchased any shares of such company nor sold any shares of that company at any point in time and definitely not during the AY 2012-13. Therefore, it is crystal clear from the above that the reasons, which led to the 2nd respondent to form a belief that the income of the petitioner escaped assessment, are admittedly based on palpably incorrect assumptions and thus the reassessment proceedings which have been initiated based on incorrect and glaring factual errors have to be dropped. 9. Learned counsel has placed reliance on the cases reported in Principal Commissioner of Income-Tax v. Meenakshi Overseas Private Limited [2017] 395 ITR 677 (Del) and South Yarra Holdings v. Income Tax Officer, Mumbai [2019] 263 TAXMAN 594 (Bom). 10. In the instant writ petition, the matter was heard at length earlier and since it was emphatically argued by learned counsel for the petitioner that the impugned notice, issued under Section 148 of the IT Act, was not in consonance with Section 151 of the IT Act and as such, on 10.12.2019, learned standing counsel for Income Tax was asked to file a specific affidavit on the aforesaid point and she was also orally asked to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... F.No.ACIT-1(1)VSP/AGVPK0314L/2012-13, dated 13.09.2019, makes it clear that the petitioner had filed objection against reopening and by assigning detailed reason the said petition was disposed of and only thereafter impugned notice under Section 148 of the IT Act was issued. 14. Relying on a judgment of the Hon ble Supreme Court, it has been argued by learned Standing Counsel for Income-Tax that once a notice under Section 148 of the IT Act is issued, appropriate course for a party is to first file return and ask the reason for issuance of notice. In this context, learned standing counsel has referred to Paragraph No.5 of the case reported in GKN Driveshafts (India) Limited v. ITO [2003] 259 ITR 0019. Learned Standing Counsel has also placed reliance on a judgment of this Court reported in GVK Gautami Power Limited v. Assistant Commissioner of Income-Tax (OSD) and another [2011] 336 ITR 451 (AP) and referred to Paragraph No.37. According to learned Standing Counsel, after issuance of notice under Section 148 of the IT Act, the first thing to be done by the petitioner was to file return. She further submits that it appears the petitioner wanted to buy time so that asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for any information relating to the LTCG. There was no discussion on LTCG in the assessment order. Subsequent to the assessment, fresh and tangible material, mentioning all the details related to the issue of pre-arranged bogus LTCG, in the case of the petitioner was received from the Deputy Director of Income Tax, Investigation Wing, Unit 3(1), Kolkata in FY 2018-19. This fresh information contains the details of the penny stock scrip M/s Ecowave Infotech Ltd along with the list of beneficiaries who booked bogus Long Term Capital Gains using this scrip. After careful perusal of the information, it is learnt that the trading activities as found in the above scrip are bogus in nature and the trading activities of this scrip were suspended at Kolkata stock exchange. It is also learnt that the petitioner is one of such beneficiaries who booked bogus LTCG for ₹ 19,53,899.55/- during the F.Y. 2011-12 relevant to A.Y. 2012-13. On further independent verification by the AO, it was learnt that no long term or short term capital gains were offered by the petitioner in the return of income i.e., the petitioner never offered LTCG on ₹ 19,53,899.55/-. The AO had sufficient reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f notice under Section 148 of the IT Act, first course is to file its return. At this juncture it is appropriate to quote Paragraph No.5 of the case reported in GKN Driveshafts8, which is as follows: 5. We see no justifiable reason to interfere with the order under challenge. However, we clarify that when a notice under section 148 of the Income Tax Act is issued, the proper course of action for the notice is to file return and if he so desires, to seek reasons for issuing notices. The assessing officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the notice is entitled to file objections to issuance of notice and the assessing officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the assessing officer has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of the above said five assessment years. 19. Time without number the Hon ble Supreme Court has deprecated interference by the High Courts while exercising power under Article 226 of the Constitution of India in matters w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al institutions to recover their dues. We hope and trust that in future the High Courts will exercise their discretion in such matters with greater caution, care and circumspection. 21. Obviously, learned counsel for the petitioner even though had placed facts of the case, but on examination, we do not find that the present case can be termed as an exceptional case for interference at initial stage of a reopening proceedings. Even if an order is passed after reopening pursuant to the notice, dated 19.03.2019, the petitioner will have a statutory remedy as provided in the IT Act. Recently, in a case reported in Authorized Officer, State Bank of Travancore and another v. Mathew K.C (2018) 3 SCC 85 , the Hon ble Supreme Court, while disapproving the approach of the High Court in interference at initial stage exercising jurisdiction under Article 226 of the Constitution of India, held as follows at Paragraph No.17: 17. We cannot help but disapprove the approach of the High Court for reasons already noticed in Dwarikesh Sugar Industries Ltd. V. Prem Heavy Engg. Works (P) Ltd. {(1997) 6 SCC 450}, observing: 32. When a position, in law, is well settl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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