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April 17, 2023

Reasons for income escapement should be stated in the Reassessment Notice

Reasons for income escapement should be stated in the Reassessment Notice

Fact and issue of the case

Allowed, subject to the petitioner filing legible copies of the annexures, at least three days before the next date of hearing.

W.P.(C) 17466/2022&CM No.55738/2022 [Application filed on behalf of the petitioner seeking interim relief]

Issue notice.

Mr Ajit Sharma accepts notice on behalf of the respondents.

In view of the direction that we intend to pass, Mr Sharma says that a counter-affidavit need not be filed. Accordingly, with the consent of the learned counsel for the parties, the writ petition is taken up for hearing and final disposal at this stage itself.

This writ petition is directed against the notice dated 19.05.2022 issued under Section 148A(b) of the Income Tax Act, 1961 [in short “Act”]. Besides this, challenge is also laid to the order dated 27.07.2022 passed

Name of Beneficiary  DateName of ScripQuantityTotal Amount
R.K. Gupta & SonsF.Y. 152014-22-09- 2014PAGE INDUSTRIES75563208
AAQHR2404F     563208
 F.Y. 162015-21-02- 2015BEML Ltd.500570170
   29-12- 2015BEML Ltd.600819312
   01-01- 2016Canara Bank3000709710
   05-01- 2016Canara Bank3000699360
   29-12- 2015Engineers India3000655710
   21-12- 2015Fortis Healthcare2000344500
   21-12- 2015Indian Hotels5000537400
   04-01- 2016Orchid Chem5000290820
   04-01- 2016Orchid Chem4000232280
   01-01- 2016Reliance Infra20001012400
   05-01-Reliance Infra1500814890
  15-01- 2016Reliance Infra1000527110
  18-01- 2016Reliance Infra25001296900
  19-01- 2016Reliance Infra1600784320
  01-01- 2016Union Bank of India5000754700
  15-01- 2016Union Bank of India1000124190

As the jurisdiction over the case lies with you, therefore, the necessary information is being shared with you for action at your end.

Observation of the court

Ajit Sharma, senior standing counsel for the respondents says that although the information supplied to the petitioner is not happily worded, what the Assessing Officer (AO) seeks to convey is that the petitioner had entered into transactions with Kisna Traders Pvt Ltd in the relevant period, through a broker going by the name Varun Capital Services Ltd., in respect of shares of companies referred to in the table extracted in departmental communication dated 15.05.2018.

According to us all that the communication dated 15.05.2018 shows, is that a survey report was generated vis-à-vis Varun Capital Services Ltd. The said communication also alludes to the fact that assessee had entered into share transaction with Kisna Traders Pvt Ltd in the Financial Years(FY) 2014-15 and 2015-16 in respect of the shares referred to in the table.

As to how this transaction led the AO to conclude/form an opinion that there was escapement of income is not articulated in the notice issued under Section 148A(b) of the Act.

Ruchesh Sinha, who appears on behalf of the petitioner, says that this was an online trading and related to a genuine transaction between the petitioner and Kisna Traders Pvt Ltd.

As adverted to above, in our opinion, the notice issued under Section 148A(b) of the Act should have clearly brought out the allegations against the petitioner.

In these circumstances, the impugned notices, both under Section 148 and 148A(b) of the Act, as also the order passed under Section 148A(d) of the Act, are set aside, with liberty to the AO to issue a fresh notice under Section 148A(b) of the Act, wherein the AO will clearly articulate as to how, according to him, the income chargeable to tax has escaped assessment.

This notice will be issued within two weeks from the date of service of the order passed today and will accompany whatever material/information is available with the AO.

The AO will grant further three weeks to the petitioner to respond to the same. Thereafter, the AO will take the next steps in the matter as per law.

The writ petition is disposed of in the aforesaid terms.

Consequently, the pending application shall stand closed.


In the result, appeal of the assessee is allowed and ruled in favour of the assessee

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