The Gujarat High Court quashed re assessment order as there was due explanation of ground of receipt of share application money.
The petitioner, Gujarat Natural Resources Limited a company, engaged in the business of trading in oil products, filed its return of income for the assessment year 2011-2012 declaring its total income. The Assessing Officer issued notice under section 143(2) of the Income Tax Act and thereafter noticed under section 142(1) of the Income Tax Act placing certain questionnaires, to which the petitioner submitted reply furnishing details and information. The assessment order under section 143(3) of the Income Tax Act was later passed.
In the communication the reasons for re-opening were supplied to the petitioner, it was stated that the Assessing Officer(AO) had received information from the investigating wing that the petitioner company had received large funds to the tune of Rs. 2.37 crores from different persons and entities.
It was stated by the AO that upon analysing the details received, it was found that the petitioner company had received share application money from total eight persons during the financial year 2010-2011 relevant to Assessment Year 2011-2012. It was further stated that out of eight persons, four persons lacked creditworthiness and their whereabouts were not found.
It was recorded that the petitioner had not fully and truly disclosed materiel facts in respect of the source of funds received, which according to the Assessment Officer was necessary for assessment for the year under consideration and thereby, it constituted the facts for the purpose of reopening of the assessment.
A Division Bench of the Court consisting of Justice N V Anjaria and Justice Bhargav D Karia observed that “Recollecting the relevant facts and aspects of this case as highlighted above, the ground of receipt of share application money from the four entities alleged to be unexplained by the Assessing Officer to proceed to exercise powers of reassessment, was the very issue considered by the Assessing Officer by calling for the relevant information in that regard in course of regular assessment undertaken for the year under consideration.
“The exercise undertaken seeking to reopen the assessment and issue of notice under section 148 of the Act and the decision to reject the objections of the assessee, both render unacceptable in law, liable to be set aside as illegal” the Court ruled.
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