In Special Civil Application No. 19275 of 2021 -GUJ HC- Gujarat High Court rules in favour of Apex Remedies Pvt. Ltd., quashes Income Tax notice under Section 148 of Income Tax Act
Justice Vipul M. Pancholi & Justice Devan M. Desai [06-07-2023]

Read Order: Apex Remedies Pvt. Ltd. V. Income Tax Officer

Chahat Varma

New Delhi, July 26, 2023: The Gujarat High Court has ruled in favour of Apex Remedies Pvt. Ltd. (assessee), by quashing the notice issued by the Income Tax Officer under Section 148 of the Income Tax Act and the subsequent proceedings. The High court determined that in this particular case, it cannot be concluded that the income liable for taxation had escaped assessment in the hands of the assessee.

In this case, the assessee challenged the notice issued by the Income Tax Officer under Section 148 of the Income Tax Act for the assessment year 2014-15. The assessee had sold an industrial plot of land along with an industrial shed to M/s. Pooja Industries for Rs. 40,00,000. The sale consideration was divided, with Rs. 11,56,159 attributed to the land (resulting in Long Term Capital Gain) and Rs. 28,43,841 to the industrial shed (resulting in Short Term Capital Gain). These capital gains were duly reported in the original income tax return. The revenue claimed that the notice was issued based on information received, suggesting that M/s. Pooja Industries paid a total of Rs. 1,10,00,000 for the property, with Rs. 40,00,000 going to the assessee and the remaining Rs. 70,00,000 being paid to two confirming parties. The revenue contended that the income of Rs. 40,00,000 had escaped assessment in the hands of the assessee.

The bench comprising of Justice Vipul M. Pancholi and Justice Devan M. Desai observed that the assessee had submitted objections in response to the reopening of the assessment. Upon careful examination of the reply, it was evident that the assessee had clearly pointed out that the entire sum of Rs. 40,00,000 was duly shown in its return of income. Additionally, the return of income, which was available in the record, indicated that the assessee had declared both Long-Term Capital Gain and Short-Term Capital Gain on the sale of the property in question. It was noted that the Income Tax Officer also disposed of the objections raised by the assessee, and in doing so, did not question the fact that the receipt of Rs. 40,00,000 had been duly shown and offered for taxation by the assessee in the return of income.

The bench further placed reliance on Assistant Commissioner of Income Tax v. Rajesh Jhaveri Stock Brokers Pvt. Ltd. [LQ/SC/2007/797] and noted that at the initiation stage of reopening an assessment, what is necessary is a reason to believe that income has escaped assessment, but it does not require the established fact of such escapement of income.

Thus, the bench concluded that in the present case, there was no basis to assert that the income chargeable to tax had escaped assessment in the hands of the assessee.