Satva Merchandize Private Limited v. Oral Order

IN THE HIGH COURT OF GUJARAT AT AHMEDABADR/SPECIAL CIVIL APPLICATION NO. 20740 of 2019 ========================================================== SATVA MERCHANDIZE PRIVATE LIMITED Versus OFFICE OF THE INCOME TAX OFFICER WARD 4(1)(1) ==========================================================Appearance: MR SUDHIR M MEHTA(2058) for the Petitioner(s) No. 1MS SHAILEE S MEHTA(5873) for the Petitioner(s) No. 1MRS MAUNA M BHATT(174) for the Respondent(s) No. 1 ========================================================== CORAM: HONOURABLE MS. JUSTICE SONIA GOKANIandHONOURABLE MR. JUSTICE RAJENDRA M. SAREEN Date : 20/09/2021 ORAL ORDER (PER : HONOURABLE MS. JUSTICE SONIA GOKANI) 1.This is a petition preferred under Article 226 of theConstitution of India seeking to challenge the reopening of theassessment of the notice which is impugned herein dated29.03.2019 issued under Section 148 of the Income Tax Act,1961 (hereinafter ‘the said Act’) with the following prayers: - “(A)Your Lordships may be pleased to admit andallow this petition. (B)Your Lordships may be pleased to issue a writof certiorari or a writ in the nature of certiorari orany other appropriate writ, order or direction forquashing and setting aside the impugned noticedated 29.03.2019 u/s 148 of the Income Tax Act,1961 at Annexure-A and the order dated18.09.2019 disposing the objections at Annexure-H. (C)Pending admission, hearing and final disposalof the present petition, be pleased to stay the implementation, operation and execution of theimpugned notice dated 29.03.2019 u/s 148 of theIncome Tax Act, 1961 at Annexure-A and the orderdated 18.09.2019 disposing the objections atAnnexure-H. (D)Your Lordships may be pleased to grant anyother and further relief which may be deemed fitand proper in the interest of justice.” 2.The brief facts leading to the present petition are asfollows: - 2.1.The petitioner is a Private Limited Company beingassessed to tax for last several years under the said Act. Therespondent is the Assessing Officer (hereinafter referred to as‘AO’) who had issued the impugned notice under Section 148of the said Act for the Assessment Year 2012-13 stating thatincome for that year has escaped assessment and asking thepetitioner company to file its return of income. 2.2.The company declared its income in the return of incomeon 28.09.2012 declaring the same to be Rs. 11,28,100/- andbook profit of Rs. 11,34,539/- under Section 115(JB) of thesaid Act. The statement of total income accompanying thereturn and audit report along with the relevant part of 3DCreport are also placed on record. 2.3.It is averred by the petitioner that during the pendingproceedings under Section 143(3), the notice under Section 142(1) was issued for information required by letter dated04.07.2014, where the points were as under: - (i)The details of bank account of the petitioner as well ascopy of the bank statement; (ii)The details of the trade payable of Rs. 61,48,17,135/-;(iii)The details of trade receivables of Rs. 61,50,98,703/-;(iii)The details of trade receivables of Rs. 61,50,98,703/-; (iv)Copy of ledger account of Excise Duty/VAT account ofRs. 10,10,69,972/-;Rs. 10,10,69,972/-; (v)The details of month wise purchase and sales; (vi)The production of books of accounts, bills and vouchersfor verification. 2.4.The petitioner submitted its reply on 22.07.2014. Afurther reply also came to be filed on 06.08.2014 giving moredetails. During the course of assessment proceedings underSection 143(3) of the said Act, the AO issued notice to M/s.Satva Merchandise Private Limited for calling for above suchdetails. The notice was issued under Section 133(6) as alsounder Section 142(1) of the said Act. 2.5.After considering all the details, the assessment underSection 143(3) was ordered on 07.11.2014 and the incomewas determined as mentioned hereinabove. 2.6.On 03.12.2018, summons was issued for hearing on (v)The details of month wise purchase and sales; (vi)The production of books of accounts, bills and vouchersfor verification. 2.4.The petitioner submitted its reply on 22.07.2014. Afurther reply also came to be filed on 06.08.2014 giving moredetails. During the course of assessment proceedings underSection 143(3) of the said Act, the AO issued notice to M/s.Satva Merchandise Private Limited for calling for above suchdetails. The notice was issued under Section 133(6) as alsounder Section 142(1) of the said Act. 2.5.After considering all the details, the assessment underSection 143(3) was ordered on 07.11.2014 and the incomewas determined as mentioned hereinabove. 2.6.On 03.12.2018, summons was issued for hearing on 12.12.2018 which was not served upon the petitioner due tochange of address. Fresh summons was issued on 21.01.2019and thereafter the respondent issued a notice on 29.03.2019under Section 148 of the said Act stating that the income hadescaped assessment for the Assessment Year 2012-2013 andasked the petitioner to file the return. The respondent wasalso supplied a copy of the reasons recorded which had beenobjected to. 2.7.According to the petitioner, the only basis of the reasonis the credible information, however, the AO has notmentioned the source of information. The base of thisallegation is unsustainable according to the petitionerbecause merely having financial transaction between one ormore entities by bank and also knowing the nature of businessin which the parties doing trading of chemicals, detergent rawmaterials and computer hardware would not amount toescapement of any income from the net of the tax. 2.8.The objections were filed by letter dated 12.07.2019.According to the petitioner it is a different company than thecompany where the directors are Mr. Fenil B. Shah, Mr.Bharat Rasiklal Shah and Smt. Geetaben B. Shah . They hadnever been the directors in the petitioner company or the company has no relation to M/s. Ardor International Pvt. Ltd.The CBI investigation of Ardor Internation Pvt. Ltd. wouldhave no connection nor any direct or indirect nexus,therefore, the reopening of assessment is not justifiable andhence, this petition. 3.On issuance of notice and grant of interim relief of not tofurther proceed with the proceedings pursuant to theimpugned notice, the other side appeared and filed hisaffidavit-in-reply denying all the allegations. 3.1.According to the respondent, the information had beenreceived in relation to Rajkot Nagrik Sahkari Bank Limitedand Axis Bank Limited. The assessee company had creditedRs. 1,48,70,52,060/- in current account No. 38/3385 withRajkot Nagrik Sahkari Bank Limited and Rs. 15,54,73,416/- inthe current account No. 910020027703814 with Axis BankLimited. In order to ascertain how bank transaction treated inbooks of account, the DDIT(Investment) issued summonsunder Section 131(1A) of the said Act to the assesseecompany on various dates calling for the details. However, theassessee company failed to comply with the summons and didnot explain the nature and sources of amounts credited in thesaid bank accounts. 3.1.According to the respondent, the information had beenreceived in relation to Rajkot Nagrik Sahkari Bank Limitedand Axis Bank Limited. The assessee company had creditedRs. 1,48,70,52,060/- in current account No. 38/3385 withRajkot Nagrik Sahkari Bank Limited and Rs. 15,54,73,416/- inthe current account No. 910020027703814 with Axis BankLimited. In order to ascertain how bank transaction treated inbooks of account, the DDIT(Investment) issued summonsunder Section 131(1A) of the said Act to the assesseecompany on various dates calling for the details. However, theassessee company failed to comply with the summons and didnot explain the nature and sources of amounts credited in thesaid bank accounts. 3.2.According to the respondent, the fact of assessee beinginvolved as a medium for circuitous transaction of rotation ofundisclosed income of directors of certain companies and wasnoticed subsequently upon verification of information. Nodetails in relation to nature and source of the credits wereverified at the original assessment stage and therefore, thecase was reopened under Section 147 of the said Act afterverification of the case record and upon verification ofinformation received from Deputy Director of the Income Tax(investment), Unit-2(1), Ahmedabad by the AO. The AO withindependent application of mind and satisfaction has reasonto believe with regard to escapement of income after referringand correlating the material on record for the year underconsideration. There has been a failure on the part of theassessee to disclose fully and truly all material facts necessaryfor assessment and the AO must have a reason to believe andsatisfy with the reasons so necessary for being the coreingredients having been fulfilled in the instant case, there isno illegality as alleged. 3.3.The assessment was reopened, according to therespondent and the notice under Section 148 of the said Actand on dated29.03.2019, it was duly served upon the assessee company. In response to the said notice, assessee companyhad filed its return of income on 29.04.2019 and declared thesame income as filed in the original return of income show inthe assessment year on 2012-2013. The reasons recorded forreopening of the assessment were provided to the assesseecompany on 18.07.2019. 3.4. According to the respondent, Central Bank of India, Ahmedabad has lodged a criminal complaint with CBIregarding fraud, cheating and other offences committed byM/s Ardor International Private Limited, Mr. Fenil B. Shah,Mr. Bharat Rasiklal Shah, Smt. Geetaben B. Shah (Director ofassessee company M/s. Satva Merchandise Private Limited) inrespect of various credit facilities extended by the CentralBank of India, Ahmedabad. The CBI, Mumbai has filed FIRagainst the directors of the assessee company and M/s ArdorInternational Private Limited in which it was stated thatmodus operandi was a circular routing of funds among interrelated parties having common management and address.This information also emphasized that the income chargeableto tax has escaped assessment. The AO with independentapplication of mind has reopened and the instant proceedingunder Section 147 have been initiated after deriving at asatisfaction by the AO. He has also recorded the reasons in writing with independent application of mind. He is expectedto form only a prima facie opinion or belief and therefore,according to the respondent, presently no interference isdesirable. 4.The rejoinder affidavit is also filed denying all theseaspects and also calling various decisions. 5.The Court has heard extensively both the sides and alsoexamined the material on record. It also called for the detailsof the FIR filed by the CBI. 6.Since the Court was disinclined to entertain this petition,learned advocate Mr. Mehta has, on instruction, chosen towithdraw this petition. writing with independent application of mind. He is expectedto form only a prima facie opinion or belief and therefore,according to the respondent, presently no interference isdesirable. 4.The rejoinder affidavit is also filed denying all theseaspects and also calling various decisions. 5.The Court has heard extensively both the sides and alsoexamined the material on record. It also called for the detailsof the FIR filed by the CBI. 6.Since the Court was disinclined to entertain this petition,learned advocate Mr. Mehta has, on instruction, chosen towithdraw this petition. 7.Accordingly, the petition stands disposed of aswithdrawn. Notice is discharged. Interim relief standsvacated. (SONIA GOKANI, J) Bhoomi (RAJENDRA M. SAREEN,J)