Failure Of Taxpayer To Disclose Fully: Gujarat High Court Refuses To Quash Reassessment

The Gujarat High Court has refused to quash the reassessment because the taxpayer has not truly and fully disclosed the material.

The division bench of Chief Justice Aravind Kumar and Justice Ashutosh Shastri observed that if the petitioner or assessee was not remedial and has now questioned the issuance of a notice, he is required by law to cooperate with the authority in the adjudication process. When the authority ultimately passes any adverse order, the entire remedy created under the special statute is very much available to the petitioner.

The petitioner/assessee is a company dealing with the business of manufacturing intraocular lenses and trading in ophthalmic surgical instruments.

ADIT (Inv) issued a summons seeking information regarding its Demat Account statements for the financial years 2012–2013 and 2013–2014. The trade details were carried out on the ledger of National Spot Exchange Limited (NSEL). The department issued a Section 148 notice to reopen the assessment.

The petitioner submitted that if merely on-the-ground information is received from DDIT that the assessee has taken accommodation entries through the NSEL platform to the tune of Rs. 3.15 crores, the case does not become ripe for reopening of assessment. On the basis of borrowed satisfaction, no reopening of the assessment was permissible.

The petitioner contended that the reopening was initiated on the basis of a change of opinion, and in view of the settled position of law, a mere change of opinion would not permit such a reopening of assessment.

The department contended that no doubt initially, the scrutiny had been undertaken, but the factum of the accommodation entry was not examined in the manner in which it had been projected. In fact, when specific information regarding bogus accommodation entries was received and the petitioner was discovered to be a party, it was determined that authority was required to initiate steps because the assessee had failed to show that the sums indicated in the accommodation entries were part of their income. The assessee has not correctly disclosed the material facts. It is always permissible for the authority to reopen the assessment.

The court held that the authority is required to be given a free hand to examine and adjudicate the issue, and there is no distinguishable case made out by the petitioner to allow the court to invoke extraordinary jurisdiction.

Case Title: Omni Lens Pvt. Ltd. Versus ACIT [R/Special Civil Application 4945 of 2021]

Case Citation: 2023 Livelaw (Guj) 14

Date: 12/01/2023

Counsel For Petitioner: Advocate B.S. Soparkar

Counsel For Respondent: Advocate Nikunt K. Raval

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