No Reassessment to Disallow Bogus Purchases if Tax Payable on Same Was Less Than Tax Paid Under Section 115JB

Case Details: Adani Wilmar Ltd. vs. Assistant Commissioner of Income-tax - [2024] 166 taxmann.com 506 (Gujarat)

Judiciary and Counsel Details

• Bhargav D. Karia & Niral R. Mehta, JJ.
• B.S. Soparkar for the Petitioner.
• Ms Maithili D. Mehta for the Respondent.

Facts of the Case

The assessee-company was regularly assessed. The assessee’s case was selected for scrutiny, and assessment orders were passed under section 143(3). Thereafter, the Assessing Officer (AO) issued a notice under section 148 seeking to reopen the completed assessment on the basis of the information received on account of a search conducted at the premises of another person under section 132.

Pursuant to the search, based on another person’s statement, it was found that the assessee was providing accommodation entries to the various beneficiaries with the help of approximately 39 shell or papers concerns, which do not exist at the address provided, and the assessee was one of the beneficiaries.

Aggrieved by the order, the assessee filed a writ petition before the Gujarat High Court.

High Court Held

The High Court held that it was apparent that the assessee was assessed under the provisions of section 115JB and paid tax at the rate specified under the said section. Adding the amount calculated by the AO towards the escaped income to the amount computed under the ordinary provisions of the Act, the aggregate amount would be less than the amount of tax paid by the assessee on being assessed under section 115JB.

Therefore, when the tax payable, as per the reasons recorded, is less than the amount paid by the assessee under the assessment framed under section 143(3), the question of any assessed income would not arise. Thus, the reasons recorded would indicate that, in fact, no income had escaped assessment to form such a belief.

The basic precondition for reopening the assessment under section 147, which is that the AO should have ‘reason to believe’ that income has escaped assessment, was not satisfied.

Therefore, the AO could not have assumed the jurisdiction to issue impugned notices under section 148, and the impugned notices and the proceedings to that effect cannot be sustained.