Non-Disclosure Of Heavy Transaction Being Made Basis To Reopen Assessment U/S 148 Income Tax Act Is Not Arbitrary: Rajasthan HC

The Rajasthan High Court held that the non-disclosure of heavy transaction by a person in the Income Tax Return (ITR) or Audit and the same being made basis to reopen assessment under Section 148 of the Income Tax Act, 1961 (ITA) is not arbitrary.

The Court held thus in a writ petition filed by a man who was aggrieved by the reopening of the assessment for the assessment year 2019-20 vide an order of the Income Tax Officer (ITO) under Section 148A(d) of ITA.

A Division Bench comprising Chief Justice Manindra Mohan Shrivastava and Justice Munnuri Laxman observed, “Non-disclosure of heavy transaction by the petitioner with Allbright Electricals Pvt. Ltd., in the ITR/Audit and the same having been made a basis to reopen assessment by issuing notice under Section 148, cannot be termed as arbitrary, whimsical or perverse, so as to warrant interference by this Court in exercise of jurisdiction under Article 226 of the Constitution of India.”

Advocate Aditya Vijay represented the petitioner while Advocate K.K. Bissa represented the respondent.

In this case, the petitioner was an individual assessee and for the year under consideration i.e., the assessment year 2019-20, he filed return of income declaring his income as Rs. 6,17,070/-. A notice under Section 148 A(b) of the Act, was issued in March 2023 based on the alleged information received from DDIT (Inv.), Mumbai that the assessee opted accommodation entries of Rs. 50,00,000/- through Allbright Electricals Pvt. Ltd. A reply was submitted by the assessee in which he sought to explain that he had not made any such transaction and did not take any loan from the said company but gave advance to it in the month of November, 2018 amounting to Rs. 65,00,000/- and that was duly paid back in installments in the month of January, 2019 and March, 2019.

The assessee asserted that the said company was not a share company and the same was a non-banking financial corporation and the same was a licensed NBFC. However, vide an order, the ITO concerned recorded opinion that Rs. 50,00,000/-, alleged to be transacted, involved the assessee and the company, did not form part of the return submitted by the assessee and, therefore, for that reason, the income of Rs. 65,00,000/-, chargeable to tax had escaped assessment in the return filed by assessee for the assessment year 2019-20.

The High Court in view of the above facts said, “Clause (d) of Section 148A clearly reveals that after receipt of reply in response to the notice under Clause (b), the Assessing Officer is required to decide, on the basis of material available on record, including the reply of the assesse, whether or not it is a fit case to issue notice under Section 148. Therefore, the enquiry under Section 148A is intended to decide whether a case of reopening of assessment is made out or not. Therefore, from the very nature of the enquiry contemplated under Section 148A, it cannot be said that a detailed enquiry and minute examination and scrutiny of each and every material on record and hearing to the assessee is necessary at this stage.”

The Court added that once the information which suggests that income chargeable to tax has escaped assessment, a case for reopening of the assessment is made out.

“We would have appreciated the submission of learned counsel for the petitioner regarding non-affording of opportunity of oral hearing and also non-supply of certain documents, which were made basis for information appended to notice under Clause (b) but for the admission on the part of the petitioner that the transaction in dispute was not reflected in the ITR/audit of the petitioner, though learned counsel for the petitioner sought to explain it by saying that the bank details discloses those transactions between the petitioner and Allbright Electricals Pvt. Ltd. Once it is admitted that heavy transaction has been made between the petitioner and Allbright Electricals Pvt. Ltd. and the same having not been disclosed in the return of income/audit, it is clear that the aforesaid transaction amounts to escaped income for the relevant assessment year”, it further said.

Therefore, the Court observed that the admission of the petitioner himself makes out a case for reopening of the assessment under Section 148 and that though the reasons which have been assigned by the Assessing Officer in the order impugned are brief in nature, it cannot be said that the order is non-speaking or mechanical in nature.

Accordingly, the High Court disposed of the writ petition.

Cause Title- Mahaveer Jain v. Income Tax Officer (Neutral Citation: 2024:RJ-JD:8397-DB)

Appearance:

Petitioner: Advocates Aditya Vijay and Pankaj Arora.

Respondent: Advocate K.K. Bissa

Click here to read/download the Order