Wp/39377/2014 Of Mr.devichand Kothari (Huf) v. Income Tax Officer

1 IN THR HIGH COURT OF KARNATAKA AT BBNGALURU DATED THIS THE 29[‘TH]DAY OF JANUARY, 20109) BRHRORE THR HON’BLE MR.JUSTICE B.S.PATIL W.P.No.39377/2014(TIT) BREITWR MR.DEVICHAND KOTHARI (HUF)9/O SHA POONAMCHAND GALBAJI,|AGED ABOUT 44 YEARS,R/AT NO.1, OMKAR VIHAR,SHARDHANAND BHAWAN ROAD,V.V.PURAM,BANGALORE -560 O04.... PETITIONER (By Sri.HARISH V.S., ADV.FOR DNS LAW HOUSE)| ANT INCOME TAX OFFICERWARD9 (3), 3 FLOOR,JEEVAN SAMPIGE, LIC BUILDING,SAMPIGE ROAD, MALLESHWARAM,|BANGALORE-560 003. _.. RESPONDENT (By Sri. DILIP, ADV. FOR Sri K V ARAVIND, ADV.) THIS WRIT PETITION IS FILED UNDER ARTICLES 226 & 227|OF THE CONSTITUTION OF INDIA, PRAYING TO QUASH THE|IMPUGNEBED ASSBSSMENT ORDER PASSED BY THR RBSPONDENU/S.143(8) R.W SECTION 14/7 OF THE INCOME TAXACT, 1961,DATED 30.00.2014 FOR THE ASSESSMENT YEAR 2008-09 LE.,|ANNX-C AND CONSEQUENTIAL NOTICE OF DEMAND ISSUED BY|THE RESPONDENT, DID 30.00.2014 FOR THE ASSESSMENT YEAR|2009-10 I.E., ANNX-D. THIS PETITION COMING ON FOR PRELIMINARY HBARING-B|GROUP THIs DAY, THE COURT MADE THE FOLLOWING: ORDER 1,Petitioner is calling in question assessment order dated30.06.2014 passed by the respondent — Income Tax Officerexercising powers under Section 143(3) read with Section 147 ofthe Income Tax Act, 1961 (for short, ‘the Act’), for theassessmentYCa I2QOO08-Ovide|Annexure-Candthe consequential demand notice dated 30.06.2014 issued vide}Annexure-L). ?)Facts leading to this writ petition briefly stated are, thatpetitioner submitted his return of income for the assessment|YCa IA2QOOQOSOT)14.09.2008declaringhisincomeat|Rs.2,92,/10/-. The said return was accepted. Subsequently,notice under Section 148 of the Act was issued on 30.06.2014forre-openingthe assessment.In|TESpoO;»ispetitionerrequested the respondent that the return filed earlier could betreated as return in response to the notice. Thereafter,respondent concluded the assessment on 30.06.2014 by addinga sum of Rs.9,71,950/- which is stated to be the amountpertaining to certain shares purchased by the petitioner out ofthe income that had allegedly escaped assessment. Accordingly, tax and interest has been levied by the respondent. It is this|order that is challenged in this writ petition. 34Learned Counsel for the petitioner invites the attention ofthe court to the representation/application filed by him on'31.01.2014 before the respondent requesting to issue copy ofthe sworn statement of one Mr. Mukesh Choksi on the basiswhereof, proceedings were re-opened. It transpires that asearch had been conducted by the income tax authorities atMumbai on M/s. Mahasagar Securities and Mukesh ChoksiGroup. At that time, Mr. Mukesh Choksi had admitted to havemade accommodation entries in his books to enable the clientsto declare speculation profit/loss, shorter gains, etc., and hadidentified the petitioner herein and certain others as some ofthe beneficiaries of the fraudulent entries/transactions bygiving a sworn statement in that regard and it is based on thesaid sworn statement of Mukesh Choksi, respondent has re-opened the proceedings. It is in this background, petitioner hadmade a request to the respondent on 31.01.2014 to provide acopy of the sworn statement, so that petitioner could takefurther course of action. 4 It is not in dispute that petitioner was not furnished withthe copy of the statement said to have been made by Mukesh.Choksi. Petitioner was not aware ot the contents of the said|statement. However, he filed objections contending inter aliathat it was not known how a statement made by third party|could be made applicable and made basis for the proceedings.that were sought to be initiated. He also points out by way ofobjection that in the absence of specific allegations madeagainst the petitioner in the so-called sworn statement, the)same could not have been made basis to pass the assessment|order against the petitioner. | 4 It is not in dispute that petitioner was not furnished withthe copy of the statement said to have been made by Mukesh.Choksi. Petitioner was not aware ot the contents of the said|statement. However, he filed objections contending inter aliathat it was not known how a statement made by third party|could be made applicable and made basis for the proceedings.that were sought to be initiated. He also points out by way ofobjection that in the absence of specific allegations madeagainst the petitioner in the so-called sworn statement, the)same could not have been made basis to pass the assessment|order against the petitioner. | 5Despite such objections raised, respondent has proceededto pass the impugned order holding that an amount ofRs.5,/1,950/- which reflected the sale proceeds of shares wasrequired to be brought to tax under the head “Other Sources ofIncome’. It is this amount which according to the findingsrecorded by the respondent was attributed to the petitioner inthe so-called sworn statement given by Mukesh Choksi. 6.Thus, it is apparent that without furnishing a copy of the statement stated to have been given by Mukesh Choksi andwithout notifying the petitioner regarding basis of the) transaction that petitioner is said to have entered into with|Mukesh Choksi, respondent has passed the impugned order.The entire basis for the impugned order is the sworn statement|of Mukesh Choksi. Unless petitioner is given opportunity tohave his say in the mater with regard to the said statement andits contents, it cannot be said that petitioner was given anopportunity of being heard in the matter. Hence, it has to beheld that the impugned order is passed without providing anyfair and reasonable opportunity of being heard to the petitioner. T.In fact, learned Counsel for the petitioner places relianceon the judgment of the Division Bench of the Delhi High Courtin the case ot Mr. Ashok Mittal Vs Assistant Commissioner ofIncome Tax and another in WP(C) No.1452/2013, wherein alsopetitioner therein had specifically objected for the assessmentproceedings stating that he had no transaction with eitherMukesh Choksi or any other related companies, but theAssessing Officer had solely proceeded on the basis of thestatement and the list provided without there being any otherinformation or details furnished to the petitioner thoughpetitioner therein had sought for such details. The High Courtot Delhi has held that there was absence of fair and reasonable opportunity and such an assessment order could not be)sustained and could be interfered with under Article 226 of theConstitution of India. 8.In the light of the facts and circumstances as adverted toabove and as the petitioner has been denied an opportunity offair hearing by providing copy of the statement and relateddetails regarding the alleged share amount, I am of the viewthat the matter requires to be re-considered by the respondent|by providing fair and reasonable opportunity of hearing to thepetitioner and by furnishing the details/copy of the statement|based on which the impugned assessment order has been.passed. QOIn the result, this writ petition is allowed. The impugnedorder is quashed. The matter is remitted for fresh considerationin accordance with law and in the light of the observations.made above. KK| Sd/-.JUDGE