9 Sharvah Multitrade Company Private Limited. v/s. Income Tax Officer Ward 4(3)(1) & Anr; [W.P. No. 3581 of 2021; Date of order: 20th December, 2021; A.Y.: 2015-16 (Bombay High Court)]
S. 148 – Reopening of assessment – Non-application of mind by AO while recording the reasons – Non-application of mind by PCIT while granting approval u/s. 151 of the Act – CBDT directed to train their officers
The Petitioner had challenged the issuance of notice for A.Y. 2015-2016 dated 31st March, 2021 issued u/s 148 of the Act, and the order rejecting the objections dated 23rd July, 2021.
The assessment had been completed u/s 143(3) of the said Act on 28th September, 2017. The Petitioner submitted that the reasons recorded for reopening indicate total non-application of mind in as much as in the tabular form, it is stated that Sharvah Multitrade Company Private Limited for F.Y. 2014-15 had been a beneficiary through fund trail of Rs. 3.72 Crores. Then again, it is mentioned that the above mentioned bogus entities managed, controlled and operated by M/s. Sharvah Multitrade Company Private Limited for providing bogus accommodation entries, hence, all the transactions entered into between the above-mentioned entities and the assessee/beneficiary are bogus accommodation entries in nature.
The Court observed how can a company provide bogus entry to itself. Sharvah Multitrade Company Private Limited is alleged to be a beneficiary identified through fund trail, and its PAN number is shown to be AAQCS2595H. Petitioner, who is the assessee, is also Sharvah Multitrade Company Private Limited, and its PAN number is AAQCS2595H. Therefore, this clearly shows total non-application of mind by the Assessing Officer Mr. Suryavanshi. His statement in the reasons “…………… and after careful application of mind ……..” is risible. Thus there was total non-application of mind by the A.O. while recording the reasons.
The Court further observed that there had been total non-application of mind while filing the affidavit in reply to the petition by the same officer – Mr. Shailendra Damodar Suryavanshi, Income Tax Officer, Ward 4(3)(1), Mumbai. In the affidavit in reply, the same Mr. Suryavanshi states, “as Annexure – 2 is the copy of the approval u/s 151 of the Act ”. There was no annexure – 1 mentioned anywhere. Moreover, in the affidavit filed in the Court, even this annexure was missing. This further displayed total non-application of mind by this officer.
The Department Counsel tendered a copy of the approval u/s 151 of the said Act, which he had in his file where it says “In view of reasons recorded, I am satisfied that it is a fit case to issue notice u/s 148 ”. PCIT, Mumbai Anil Kumar, signed this.
The Court observed that if this PCIT only read the reasons recorded, he would have raised a query about how can an entity provide bogus entry to itself. That shows total non-application of mind by the said Mr. Anil Kumar as well.
The Court further observed that one Vijay Kumar Soni, Range 4(3), Mumbai, has recommended a grant of approval. That shows non-application of mind even by this Vijay Kumar Soni. The Court wondered whether the officers of respondents ever bothered to read the papers before writing the reasons or recommending for approval or while granting approval.
The Court observed that in the objections filed by petitioner vide its letter dated 10th May, 2021, the petitioner raised these points and alleged lack of application of mind. The said Mr. Suryavanshi while rejecting the objections, by an order dated 23rd July 2021, first of all, makes a false statement that “the assessee’s above submissions and objections have been carefully considered and the same are dealt with as under ” but he does not deal with the objection of the assessee of lack of application of mind. The said Mr. Suryavanshi is totally silent about the objections raised on non-application of mind.
In view of the above, the Court allowed the petition and quashed the impugned reassessment proceedings for A.Y. 2015-16 as wholly without jurisdiction, illegal, arbitrary, and liable to be quashed.
A copy of this order was directed to be sent to the Chairman, CBDT, to formulate a scheme whereby the officers are trained on how to apply their minds and what all points should be kept in mind while recording the reasons. The Chairman, CBDT, may also advise the concerned Commissioners not to grant approval u/s 151 of the said Act mechanically but after considering the reasons carefully and scrutinizing the same.
