Gujarat High Court
The Valsad District Central Co-Op Bank ... vs Assistant Commissioner Of Income Tax, ... on 8 July, 2024
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
NEUTRAL CITATION
C/SCA/4910/2022 JUDGMENT DATED: 08/07/2024
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 4910 of 2022
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR. JUSTICE NIRAL R. MEHTA
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1 Whether Reporters of Local Papers may be allowed
to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy
of the judgment ?
4 Whether this case involves a substantial question
of law as to the interpretation of the Constitution
of India or any order made thereunder ?
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THE VALSAD DISTRICT CENTRAL CO-OP BANK LIMITED
Versus
ASSISTANT COMMISSIONER OF INCOME TAX, VALSAD CIRCLE & ANR.
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Appearance:
MR MANISH J SHAH(1320) for the Petitioner(s) No. 1
MRS KALPANA K RAVAL(1046) for the Respondent(s) No. 1
SERVED BY RPAD (N) for the Respondent(s) No. 2
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CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR. JUSTICE NIRAL R. MEHTA
Date : 08/07/2024
ORAL JUDGMENT
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
1. Heard learned advocate Mr. Manish Shah for Page 1 of 19 Downloaded on : Fri Aug 02 21:06:37 IST 2024 NEUTRAL CITATION C/SCA/4910/2022 JUDGMENT DATED: 08/07/2024 undefined the petitioner and learned Senior Standing Counsel Mr. Karan Sanghani for learned advocate Mrs. Kalpana Raval for the respondents.
2. Rule returnable forthwith. Learned Senior Standing Counsel Mr. Sanghani waives service of notice of rule on behalf of the respondents.
3. Having regard to the controversy in a narrow compass, with the consent of the learned advocates for the respective parties, the matter is taken up for hearing.
4. By this petition under Article 226 of the Constitution of India, the petitioner has challenged the notice dated 31.03.2021 for Page 2 of 19 Downloaded on : Fri Aug 02 21:06:37 IST 2024 NEUTRAL CITATION C/SCA/4910/2022 JUDGMENT DATED: 08/07/2024 undefined the Assessment Year 2015-16 issued under section 148 of the Income Tax Act,1961 [for short 'the Act'] for reopening of the assessment.
5. In response to the request of the Assessee, reasons recorded by the Assessing Officer were supplied along with notice under section 143(2) dated 30.06.2021. Detailed reasons recorded by the Assessing Officer read as under:
"1. Brief details of the Assessee:
The assessee is an Association of Persons, engaged in the activity of banking and deriving income from profit & gains of business or profession during the year. The assessee has filed his return of income for A.Y. 2016-17 on 28.09.2016 declaring his total income at Rs. 5,17,74,340/-. The return Page 3 of 19 Downloaded on : Fri Aug 02 21:06:37 IST 2024 NEUTRAL CITATION C/SCA/4910/2022 JUDGMENT DATED: 08/07/2024 undefined of income of the assessee was processed u/s. 143(3) of the Act on 21/12/2018 assessing the total income at Rs. 5,26,00,170/-;
(a) Nature of business activity:
On going through the retum of income filed for AY 2016-17, it is seen that the assessee has derived income from business & profession during the FY relevant to AY 2016-17.
(b) Details of previous filing of ROI/processing and scrutiny:
2. Brief details of information collected/ received by the AO:
In this case, information has been received from the DDIT(Inv), Valsad through the Insight Portal that during the FY relevant to AY 2016-17, the assessee has deposited huge amounts of Page 4 of 19 Downloaded on : Fri Aug 02 21:06:37 IST 2024 NEUTRAL CITATION C/SCA/4910/2022 JUDGMENT DATED: 08/07/2024 undefined cash amounting to Rs 5,05,00,000/in his current bank account in Indusind Bank Limited, Valsad Branch 3 Analysis of information collected/ received:
In this case, on verification of ITD/ITBA, it is noticed that return of income for A.Y. 2016-17 was filed by the assessee if 28.09.2016. Scrutiny assessment u/s 143(3) has been completed in this case for A.Y. 2016-
17.During the scrutiny assessment for AY 2016-17, additions on account of disallowance of thé claim u/s. 37 paid towards unapproved Gratuity fund and on account of Income Tax Expenses were made. As per the information received, "Mr Dashrathsingh Rajput, Mr Maganlal Patel, Mr Jayantilal Parmar, Mr Prafulchandra B Naik and Gunvantrai K Vashi maintains current a/c No. 200006404127 in the name of M/s Valsad Dist Central Co-op Bank Ltd, Halar Road Page 5 of 19 Downloaded on : Fri Aug 02 21:06:37 IST 2024 NEUTRAL CITATION C/SCA/4910/2022 JUDGMENT DATED: 08/07/2024 undefined Branch since 30/06/2003.Customer has submitted PAN at the time of account opening. Scrutiny of the current a/c No. 200006404127 during the period from Féb 2015 to July 2015 revealed that, high value cash credits aggregating to Rs 5.05crs are séen in the current a/c no.200006404127 and the proceeds, were immediately debited from the account through cheque issuance, funds transfers and RTGS M/s Valsad Dist Central Co-op Bank. Huge cash deposits amounting to just below the threshold limit of Rs 10 lacs is seen in the above account. High value cash deposits aggregating to large amount in current account followed by immediate utilization of proceeds coupled with high volume of cash deposit is not matching with declared profile of the customer".
4. Enquiries made by the AO as sequel to information collected/ Received:Page 6 of 19 Downloaded on : Fri Aug 02 21:06:37 IST 2024
NEUTRAL CITATION C/SCA/4910/2022 JUDGMENT DATED: 08/07/2024 undefined It is seen that the assessee has not submitted any proper explanation regarding the huge cash deposits.
5. Findings of the AO:
On verification on of ITD/ITBA, it is noticed that return of income for A.Y. 2016-17 was filed by the assessee on 28 09 2016. Scrutiny assessment u/s 143(3) has been completed in this case for A.Y. 2016-17. During the scrutiny assessment for AY 2016-17, additions on account of disallowance of the claim u/s 37 paid towards unapproved Gratuity fund and on account of Income Tax Expenses were made. However, the assessee does not have any proper explanation to offer for the huge cash deposit. In view of the above, it is seen that the assessee has no explanation to offer regard ng cash deposits of Rs 5,05,00,000/in the bank account.
Therefore the undersigned has reason to believe that the income chargeable to tax amounting to Rs.5,05,00,000/-has Page 7 of 19 Downloaded on : Fri Aug 02 21:06:37 IST 2024 NEUTRAL CITATION C/SCA/4910/2022 JUDGMENT DATED: 08/07/2024 undefined escaped assessment in the hands of the assessee for the assessment year under consideration."
6. Learned advocate Mr. Shah for the petitioner submitted that the petitioner is a Co-operative bank engaged in the business of banking under the Banking Regulation Act, 1949.
7. It was submitted that the assessee filed the return of income for A.Y. 2016-17 declaring total income of Rs. 51,77,340/-. The case of the petitioner was selected for scrutiny assessment and notices under sections 142(1) and 143(2) of the Act were issued from time-to-time by the Assessing Officer which were replied by the assessee giving all the requisite details called for and order under section 143(3) of the Page 8 of 19 Downloaded on : Fri Aug 02 21:06:37 IST 2024 NEUTRAL CITATION C/SCA/4910/2022 JUDGMENT DATED: 08/07/2024 undefined Act dated 21.12.2018 was passed determining the total income of Rs. 5,26,00,104/- by making addition of Rs. 8,25,830/-. It was submitted that the petitioner being aggrieved, has preferred appeal before the CIT(A).
8. It was submitted that the impugned notice for reopening of the assessment was objected by the assessee by filing detailed objection however, the same was disposed of by the order dated 14.02.2022 without considering the same in detail.
9. It was further submitted that the assessee has filed all the requisite details during the course of regular assessment including the details of the bank account maintained by the assessee bank with other bank for Page 9 of 19 Downloaded on : Fri Aug 02 21:06:37 IST 2024 NEUTRAL CITATION C/SCA/4910/2022 JUDGMENT DATED: 08/07/2024 undefined facilitation of the banking transaction carried on by the petitioner.
10. It was also pointed out that the respondent No.1 has issued the impugned notice only on the basis of the verification and for making fishing inquiry as information is received that four persons have opened the account in the name of the bank who are admittedly the employees of the bank and having been authorized to operate the account with the Indusind Bank, deposited the cash in the account of the petitioner-Bank for carrying out banking transactions on behalf of the customers of the petitioner- Bank. It was submitted that the respondent No.1 could not have assumed the jurisdiction to issue the impugned notice Page 10 of 19 Downloaded on : Fri Aug 02 21:06:37 IST 2024 NEUTRAL CITATION C/SCA/4910/2022 JUDGMENT DATED: 08/07/2024 undefined as there is no escapement of income and the reasons recorded are only based upon the assumption and presumption and borrowed satisfaction without application of mind.
11. Learned advocate Mr. Shah has referred to and relied upon Sunrise Education Trust vs. Income Tax Officer reported in [2018] 92 taxmann.com 74 (Guj) in support of his submissions wherein it is held as under:
"6. Counsel for the Revenue however contended that in such return, the assessee had not disclosed the income of Rs. 33.97 lacs which the assessee- trust received in cash and deposited in a bank account. This assertion also is not borne out from the record. The assessce had from the outset been contending that the assessce's accounts are duly audited Page 11 of 19 Downloaded on : Fri Aug 02 21:06:37 IST 2024 NEUTRAL CITATION C/SCA/4910/2022 JUDGMENT DATED: 08/07/2024 undefined and such audited accounts are presented alongwith the return. This has been so asserted in the objections before the Assessing Officer as well as in the petition before us. Both times, the response of the Assessing Officer in the order disposing of the objections and the affidavit-in-reply filed in this petition is that the assessee's cash deposits can only be verified through assessment proceedings. In other words, the Assessing Officer does not even contended that the said cash deposits were not duly reflected in the return filed, but that he wishes to verify the validity of such deposits and the assessee's claim of exemption, being a Trust. It is well settled through series of judgments of this Court that re-assessment, even in a case where the return was not scrutinized before acceptance originally, cannot be resorted to unless the Assessing Officer had a reason to believe that the income Page 12 of 19 Downloaded on : Fri Aug 02 21:06:37 IST 2024 NEUTRAL CITATION C/SCA/4910/2022 JUDGMENT DATED: 08/07/2024 undefined chargeable to tax has escaped assessment. In other words, for mere verification or for a fishing inquiry, reopening of the assessment is not permissible. 7. In the result, the impugned notice is set-aside. Petition is allowed accordingly."
12. On the other hand, learned advocate Mr.Sanghani submitted that respondent No.1 has recorded the reasons on the basis of the information received from DDIT (Inv.), Valsad, through Insight Portal during the financial year relevant to the Assessment Year 2016-17. The petitioner has deposited huge amount of cash of Rs. 5,05,00,000/- in the current account in the Indusind Bank, Valsad Branch. It was further submitted that as per the information received four persons viz. Mr. Dashrathsinh Rajput, Mr. Maganlal Patel, Page 13 of 19 Downloaded on : Fri Aug 02 21:06:37 IST 2024 NEUTRAL CITATION C/SCA/4910/2022 JUDGMENT DATED: 08/07/2024 undefined Mr. Jayantilal Parmar, Mr. Prafulchandra B. Naik and Mr. Gunvantrai K Vashi have maintained the current account number 200006404127 in the name of the petitioner-Bank and they have operated the account by depositing cash. It was submitted that such deposit was immediately debited from the account through cheque, erroneous fund transfer and RTGS to the petitioner-Bank and it was therefore submitted that issuance of notice under section 148 of the Act in the facts of the case is not based on any change of opinion whereas it is based on relevant fresh information coming to the possession of the Assessing Officer and subsequently, on fresh perspective of the case, as the reopening is made within a period of four years, the proviso to Page 14 of 19 Downloaded on : Fri Aug 02 21:06:37 IST 2024 NEUTRAL CITATION C/SCA/4910/2022 JUDGMENT DATED: 08/07/2024 undefined section 147 of the Act would not be applicable to the facts of the case.
13. Learned advocate Mr.Sanghani therefore submitted that the assessee having alternative remedy to challenge the assessment order before CIT(A), in case, if the addition is made on the basis of the reopening, no interference should be made while exercising the extraordinary jurisdiction under Article 226 of the Constitution of India.
14. Considering the above submissions, it is not in dispute that the petitioner is a registered Cooperative Bank carrying out banking business i.e. dealing in cash of the customers. It is also apparent from the documents placed on record that the accounts of the petitioner are duly Page 15 of 19 Downloaded on : Fri Aug 02 21:06:37 IST 2024 NEUTRAL CITATION C/SCA/4910/2022 JUDGMENT DATED: 08/07/2024 undefined audited and the search audit report, audited balance-sheet, profit and loss account along with audit report under Section 44AB is already filed along with return of income. From the reply of the petitioner dated 15.11.2018 given during the regular course of assessment in response to the notice under section 143(2),the petitioner has stated as under:
" (17) You will also appreciate that the assessee bank has incurred the expenses wholly and exclusively for the business of banking and there is no adverse remark of the statutory auditors of NABARD. As a matter of fact, all the details as to the nature of various expenditures under the particular heads are already reported in the statutory audit report filed along with the tax audit report furnished at the time of filing of return of Page 16 of 19 Downloaded on : Fri Aug 02 21:06:37 IST 2024 NEUTRAL CITATION C/SCA/4910/2022 JUDGMENT DATED: 08/07/2024 undefined income for the year. However, it is not practically and physically possible to comply with the query raised by you in a very routine and mechanical manner, asking for the details of all expenses debited to the P & L A/c with name and addresses of the parties, etc. being it is very bulky and voluminous.
Needless to say, the assessee bank has no hesitation to provide the details of particular expenses, if viewed by you as not incurred for the business purposes of the bank. (18) As per the records of the bank, there is no mismatch between the income shown in the P & L A/c and reported in Form 26AS, which may please be noted."
15. From the above disclosure made by the petitioner, it is clear that the Page 17 of 19 Downloaded on : Fri Aug 02 21:06:37 IST 2024 NEUTRAL CITATION C/SCA/4910/2022 JUDGMENT DATED: 08/07/2024 undefined petitioner was also subject to the statutory audit by the NABARD. Thus, the petitioner-Bank who has carried out the normal banking transaction by depositing cash of the customers in its current account maintained with Indusind Bank for carrying out banking transaction on behalf of the customers, by no stretch of imagination can result into escapement of income. The reasons recorded by the Assessing Officer so as to assume the jurisdiction are therefore, contrary to the basic account accounting principles of banking industry whereby the cash is received from the customer can never be said to partake a character of cash credit by depositing the same in the bank account of the petitioner-Bank kept with other bank. In such circumstances, when there is Page 18 of 19 Downloaded on : Fri Aug 02 21:06:37 IST 2024 NEUTRAL CITATION C/SCA/4910/2022 JUDGMENT DATED: 08/07/2024 undefined no escapement of income, the reopening of assessment cannot be permitted merely for the purpose of verification or for fishing inquiry and the impugned notice under section 148 of the Act is not tenable in eye of law.
16. For the foregoing reasons, the petition therefore succeeds. Impugned notice dated 30.03.2021 issued under section 148 of the Act is hereby quashed and set aside and consequently, the order rejecting the objection also is set aside. Rule is made absolute accordingly. No order as to costs.
(BHARGAV D. KARIA, J) (NIRAL R. MEHTA,J) JYOTI V. JANI Page 19 of 19 Downloaded on : Fri Aug 02 21:06:37 IST 2024