High Court quashed re-assessment order u/s 147 and order passed u/s 148A(d) for treating the whole turnover of trading in future and options as income
In a recent judgment, the Hon’ble Bombay High Court has quashed re-assessment order passed u/s 147 order passed u/s 148A(d) and show cause notice u/s 148A(a) for treating the whole turnover of trading in future and options as income.
ABCAUS Case Law Citation:
ABCAUS 4009 (2024) (05) HC
In the instant case, the Petitioner assessee had filed a Writ Petition challenging the Assessment Order passed under Section 147 read with Sections 144 and 144B of the Income Tax Act, 1961 (the Act), demand Notice issued under Section 156 of the Act and Penalty Notices issued under Section 274 read with Section 270A and 271AAC of the Act for Assessment Year (A.Y.) 2018-19.
Petitioner was filing returns for years before the relevant financial year. During AY 2017-18 petitioner sold a residential house and decided to utilize it in the stock market and become millionaire overnight.
However, the Petitioner not only lost his investment amount but lost further because he traded in futures and segment option. Notably, the Petitioner had hit a turnover of nearly Rs. 100 crores. Petitioner also lost his job.
It was pleaded that the petitioner was upset and therefore was not in a proper frame of mind even to respond to the notice that he received under Section 148A(b) of the Act. Petitioner did not even file the return of income.
It was submitted that the petitioner only woke up when he received the Assessment Order because he had not even bother to respond to the notice issued under Section 148 of the Act which was preceded by an order issued under Section 148A(d) of the Act.
Petitioner did not respond to the multiple notices issued under Section 142(1) of the Act. In view of the total non co-operation or lack of response from petitioner the Assessment Order came to be passed adding the entire turnover as petitioner’s income.
The Revenue argued that in view of petitioner’s conduct, the Hon’ble High Court should not exercise its jurisdiction under Article 226 of the Constitution of India and petitioner should be directed to file an appeal before the Commissioner of Income Tax (Appeal).
The Hon’ble High Court observed that though the petitioner’s conduct was not acceptable, still in the facts and circumstances of the case it was not inclined to direct petitioner to file an appeal and thereby exhaust the alternate remedy because in no circumstances the entire receipt could have been treated as the income of assessee.
The submission of the Petitioner that the tax demand was in crores and the appellate authority for stay will insist on petitioner depositing 20% which would be exorbitant.
Therefore, the Hon’ble High Court held that the Assessment Order could not have been passed treating the entire receipt as income of petitioner and quashed and set aside the impugned Assessment Order alongwith orders passed under Section 148A(d) of the Act and also the notice issued under Section 148 of the Act. The Notice of Demand issued under Section 156 of the Act and Penalty Notice issued under Section 274 read with Section 270A and 271AAC of the Act were also quashed and set aside.
The Hon’ble High Court directed that the Petitioner within seven working days of receiving an intimation of opening of portal file reply/objections to the show cause notice issued under Section 148A(b) of the Act. The A.O. shall pass the order under Section 148A(d) of the Act after giving personal hearing to petitioner, notice whereof shall be communicated atleast seven working days in advance.
At the same time the Hon’ble High Court directed the Petitioner to pay a sum of Rs.50,000/- as donation to P.M. Cares Fund.
Also, it was directed that the time spent from issuing of show cause notice under Section 148A(b) of the Act until date shall stand excluded in calculating the limitations for passing the Assessment Orders in the case of petitioner.
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