DIVYANG JAYENDRABHAI SHAH vs THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-1
- Court
- Gujarat High Court
C/SCA/22214/2019 JUDGMENT DATED: 14/07/2026
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 22214 of 2019
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE A.S. SUPEHIA
and
HONOURABLE MS. JUSTICE VAIBHAVI D. NANAVATI
==========================================================
Approved for Reporting Yes No
==========================================================
DIVYANG JAYENDRABHAI SHAH
Versus
THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-1
==========================================================
Appearance:
MR TUSHAR HEMANI, SENIOR ADVOCATE with MS VAIBHAVI K
PARIKH(3238) for the Petitioner(s) No. 1
MR.VARUN K.PATEL(3802) for the Respondent(s) No. 1
==========================================================
CORAM: HONOURABLE MR. JUSTICE A.S. SUPEHIA
and
HONOURABLE MS. JUSTICE VAIBHAVI D. NANAVATI
Date : 14/07/2026
ORAL JUDGMENT
(PER : HONOURABLE MR. JUSTICE A.S. SUPEHIA)
1.
The present writ petition has been filed seeking quashing and
setting aside the notice dated 28.03.2019 issued under Section 148 of the
Income tax Ac, 1961 (for short ‘the Act’) for reopening the assessment
for the Assessment Year (for short ‘A.Y.’) 2012-13.
Page 1 of 10
Uploaded by K.K. SAIYED(HC00169) on Mon Jul 20 2026 Downloaded on : Mon Jul 20 17:08:34 IST 2026
C/SCA/22214/2019 JUDGMENT DATED: 14/07/2026
BRIEF FACTS:
2. The petitioner is engaged in the business of trading of all types of
ferrous, non-ferrous items, machinery, etc. During the Financial Year
2011-12 relevant to the A.Y. 2012-13 (i.e. the year under consideration),
the petitioner had carried out certain transactions with "M/s.Shoryaraj
Enterprise (Prop. Satyajitsinh Rajendrasinh Gohil)". At the beginning of
the year under consideration, there was a credit balance of Rs.1,00,000/-
of the said party in books of accounts. At the end of the year under
consideration, there was a debit balance of Rs.6,47,201/- i.e. such sum
was receivable from the said party. The said balance duly appears in the
schedule in respect of "Sundry Debtors" forming part of Audited Annual
Accounts.
2.1 The case of the petitioner for the year under consideration was
selected for scrutiny. Various details and information were called for by
then Assessing Officer including the details pertaining to "sundry
debtors". The petitioner vide letter 20.02.2015, furnished details
pertaining to the sundry debtors wherein details pertaining to "Shoryaraj
Enterprise" were also mentioned.
2.2 The then Assessing Officer, after threadbare examining the details
so furnished by the petitioner, consciously chose not to make any addition
in respect of transactions entered into with "M/s.Shoryaraj Enterprise"
while framing assessment under Section 143(3) of the Act vide order
dated 13.03.2015. After a period of almost six years from the end of the
A.Y. in question, the respondent issued notice dated 28.03.2019 under
Section 148 of the Act seeking to reopen the assessment for the year
Page 2 of 10
Uploaded by K.K. SAIYED(HC00169) on Mon Jul 20 2026 Downloaded on : Mon Jul 20 17:08:34 IST 2026
C/SCA/22214/2019 JUDGMENT DATED: 14/07/2026
under consideration.
2.3 The petitioner, vide letter dated 20.04.2019, requested the
respondent to treat the original return of income as return filed in
response to the impugned notice and also requested the respondent to
supply a copy of reasons recorded for reopening the case of the petitioner.
The petitioner was supplied copy of reasons for reopening vide letter
dated 15.10.2019. Perusal of reasons for reopening reveals that the case
of the petitioner has been reopened broadly on the alleged count that the
petitioner is one of the beneficiaries of accommodation entries provided
by "M/s.Shoryaraj Enterprise".
2.4 The petitioner, vide letter dated 12.11.2019, raised objections
against reopening. In view of submissions raised therein, it was submitted
that reopening is not justified. The respondent, vide order dated
09.12.2019, disposed off such objections and, inter alia , held that
reopening is justified in the eye of law.
SUBMISSIONS ON BEHALF OF ASSESSEE :
3. Learned Senior Advocate Mr.Tushar Hemani while placing
reliance on the judgment of High Court of Allahbad in the case of
Mahesh Kumar Gupta vs. Commissioner of Income-tax, (2013) 33
Taxmann.com 409 (Allahbad) and judgment of learned Single Judge of
Karnataka High Court in case of Novo Nordisk India Pvt. Ltd., vs.
Deputy Commissioner of Income-tax, (2018) 95 Taxmann.com 225
(Karnataka) has submitted that the impugned notice and reopening of the
assessment is required to be quashed and set aside as the Accessing
Officer has not at all quantified or specified the amount as to which
Page 3 of 10
Uploaded by K.K. SAIYED(HC00169) on Mon Jul 20 2026 Downloaded on : Mon Jul 20 17:08:34 IST 2026
C/SCA/22214/2019 JUDGMENT DATED: 14/07/2026
income chargeable to tax has escaped the assessment.
3.1 He has also referred to the provision of Section 149(1)(b) of the
Act and has submitted that no notice under Section 148 of the Act can be
issued for an A.Y. if four years, but not more than six years, have elapsed
from the end of the relevant A.Y. unless the income chargeable to tax
which has escaped assessment amounts to or is likely to amount to
Rs.1,00,000/- or more for that year. Thus, it is urged that in absence of
any quantification of the amount, the reopening of the assessment is
required to be quashed and set aside.
3.2 It is further submitted that, in fact, there is no escapement of
income as alleged in the impugned notice since perusal of the ledger of
M/s.Shoryaraj Enterprise would reveal that at the beginning of the year
under consideration, there was a credit balance of Rs.1,00,000/- of the
said party in the books of accounts, whereas at the end of the year under
consideration, there was a debit balance of Rs.6,47,201/- i.e. the sum
receivable from the said party. It is submitted that this implies that the
petitioner had advanced certain sum to M/s.Shoryaraj Enterprise, out of
which Rs.6,47,201/- was to be recovered from the said party at the end of
the year. Thus, it is submitted that in fact there is no escapement of any
income chargeable to tax.
3.3 Further, it is submitted that the assessment for the year under
consideration was framed under Section 143(3) of the Act. It is submitted
that in the scrutiny assessment, the petitioner had clarified the details
pertaining to sundry debtors which formed part of the audited annual
accounts, and after such clarification was tendered by the petitioner, the
Page 4 of 10
Uploaded by K.K. SAIYED(HC00169) on Mon Jul 20 2026 Downloaded on : Mon Jul 20 17:08:34 IST 2026
C/SCA/22214/2019 JUDGMENT DATED: 14/07/2026
Assessing Officer framed the assessment order under Section 143(3) of
the Act vide order dated 13.03.2015. Thus, after threadbare examination
of details so furnished and examined by the Assessing Officer, the
reopening of the assessment beyond the period of four years is nothing
but a change of opinion.
3.4 Learned Senior Advocate Mr.Hemani has also pointed out the
objections raised by the petitioner vide his letter dated 12.11.2019 to the
notice dated 28.03.2019, and it is contended that though the petitioner had
specifically mentioned that the reopening of the assessment is premised
on the statement of one Mr.Satyajitsinh Rajendrasinh Gohil, who is a
proprietor of M/s.Shoryaraj Enterprise, which was recorded on
20.03.2014, whereas the assessment was framed in the case of the
petitioner on 13.03.2015, almost one year later and thus the assessment
having been framed under Section 143(3) of the Act and the Department
since was already having the information in the form of the statement of
Mr.Gohil, still the Assessing Officer consciously chose not to make any
addition in respect of the transaction entered into with M/s.Shoryaraj
Enterprise. It is contended that though the petitioner has raised various
submissions including the non-quantification of the amount, such
objections are very cursorily dealt with by the Assessing Officer vide
order dated 09.12.2019 and hence, it is urged that impugned notice dated
28.03.2019 be quashed and set aside.
SUBMISSIONS ON BEHALF OF REVENUE:
4. Opposing the foregoing submissions and the present writ petition
learned Senior Standing Counsel Mr.Varun K. Patel has urged that at this
stage, the reopening of the assessment for the year A.Y. 2012-13 may not
Page 5 of 10
Uploaded by K.K. SAIYED(HC00169) on Mon Jul 20 2026 Downloaded on : Mon Jul 20 17:08:34 IST 2026
C/SCA/22214/2019 JUDGMENT DATED: 14/07/2026
be interfered with since after framing of the assessment, order under
Section 143(3) of the Act, an information from the Investigation Wing
was received that M/s.Shoryaraj Enterprise is an accommodation entry
provided having no genuine business, and as the petitioner has transacted
with such bogus entity, notice under Section 148 of the Act was issued.
4.1 He has referred to the reasons recorded in the reopening of the
assessment and also pointed out the entries of debit and credit as
mentioned in the reasons and contended that from the perusal of the
same, it can be presumed that the petitioner has transacted with the bogus
entry and reopening is permissible in such circumstances, as the income
chargeable to tax is more than Rs.1,00,000/-, as mandated under the
provision of Section 149 of the Act. Thus, it is urged that the present writ
petition may not be entertained, at this stage, and the petitioner may be
relegated to face the assessment proceedings.
ANALYSIS AND OPINION :
5. We have heard the learned advocates appearing for the respective
parties at length and perused the documents on the record. The
established facts from the pleadings and from the record is that the
petitioner for the financial year 2011-12 had carried out certain
transactions with M/s.Shoryaraj Enterprise. The return of the income was
selected for scrutiny assessment and the petitioner was called upon to
furnish various details and information pertaining to sundry debtors
which formed part of the audited annual accounts and the transactions
with M/s.Shoryaraj Enterprise. The petitioner furnished its ledgers and all
the information to the Assessing officer and after threadbare examining
the details so furnished by the petitioner the Assessing Officer framed the
Page 6 of 10
Uploaded by K.K. SAIYED(HC00169) on Mon Jul 20 2026 Downloaded on : Mon Jul 20 17:08:34 IST 2026
C/SCA/22214/2019 JUDGMENT DATED: 14/07/2026
assessment order under Section 143(3) of the Act vide order dated
13.03.2015. After almost period of six years the respondent issued a
notice on 28.03.2019 under Section 148 of the Act seeking to reopen the
assessment for the year 2012-13. The petitioner filed a detailed objection
to such reopening by letter dated 12.11.2019. The foremost contention
which was raised by the petitioner is that the Assessing Officer has not
quantified the amount of escapement of income chargeable to tax as
mandated by the provision of Section 149(1)(b) of the Act as no notice
under Section 148 of the Act can be issued for assessment year, if four
years, but not more than six years have elapsed from the end of relevant
assessment year unless the income chargeable to tax which has escaped
assessment amounts to or is likely to amount to Rs.1,00,000/- or more for
that year.
6. In this context, we have examined the reasons recorded for
reopening. We find that the Assessing Officer has simply pasted the debit
and credit entries of the petitioner and transactions relating to
M/s.Shoryaraj Enterprise. Thereafter it is opined that there is “reason to
believe” that the transaction made by the assessee (petitioner) whose bank
accounts are bogus and has escaped assessment. It is alleged that there is
high value transaction for year under consideration and the return of
income has been filed showing negligible amount of income and thus
there is “reason to believe” that income chargeable to tax has escaped
assessment. Thus, there is no quantification of the amount worth the
name suggesting that the income of more than Rs.1,00,000/- as mandated
under the provisions of Section 149 of the Act has escaped assessment.
On this count the impugned order is required to be quashed and set aside.
We may in this regard adopt the reasoning of the High Court of
Page 7 of 10
Uploaded by K.K. SAIYED(HC00169) on Mon Jul 20 2026 Downloaded on : Mon Jul 20 17:08:34 IST 2026
C/SCA/22214/2019 JUDGMENT DATED: 14/07/2026
Allahabad in the case of Mahesh Kumar Gupta (Supra) which is as
under :-
“12. The stand of the department as is evident from the above quoted
paragraph has no legs to stand. The Joint/Additional Commissioner,
Income Tax was not aware about the fact that the income chargeable to
tax which has escaped the assessment is Rs.1 Lakh or more for the
relevant Assessment Year. The proviso to section 151 (1) fortifies our
view which says that after the expiry of four years from the end of the
relevant Assessment Year no notice under section 148 shall be issued or
unless the Chief Commissioner or Commissioner is satisfied on the
reasons recorded by the Assessing Officer that it is a fit case for issue of
such notice. On a true and proper constructions of the proviso it is
imperative that the Assessing Officer in his reason should state that the
escaped income is likely to be Rs. 1 Lakh or more so that the Chief
Commissioner or the Commissioner may record his satisfaction. The
sanctioning authority must be aware that it has exercised power of
extended period of limitation under 149(1) (b) of the Act. Exception has
been carved out by clause (b) to section 149(1) in respect the income
chargeable to tax which has escaped assessment, amounts to Rs. 1 Lakh
or more. To fall within exception clause the relevant facts should have
been recorded by the Assessing Authority in its order while recording
the reason so that a sanctioning authority may apply its mind to the
proposition while granting the sanction.
xxx
15. The only point urged and pressed before us is whether in absence of
anything in the reasons recorded to suggest that the income chargeable
to tax which has escaped the assessment is Rs. one lakh or more having
not been mentioned the reassessment notice given after four years of the
close of the assessment order is valid or not.
16. For the reasons given above, we find sufficient force in the argument
of the learned counsel for the petitioner that on the basis of the reasons
recorded by the Assessing Officer, the initiation of the reassessment
proceedings relevant to the Assessment Year 2000-2001 by means of the
notice dated 23.3.2007 after more than four years is clearly barred by
time.”
7. Thus, the provision of Section 149(1)(b) of the Act, quantifies the
escapement of income of Rs.1,00,000/- or more and since the impugned
notice/reasons are bereft of any quantification of amount, coupled with
Page 8 of 10
Uploaded by K.K. SAIYED(HC00169) on Mon Jul 20 2026 Downloaded on : Mon Jul 20 17:08:34 IST 2026
C/SCA/22214/2019 JUDGMENT DATED: 14/07/2026
the fact, the reassessment notice has been issued after a period of four
years, the re-opening of assessment is required to be quashed and set
aside.
8. There is yet another reason which compels us to interfere with the
reopening of the assessment. It is not in dispute that the petitioner in his
objections vide letter dated 12.11.2019 has specifically mentioned that
the statement of Mr.Satyajitsinh Rajendrasinh Gohil i.e. proprietor of
M/s.Shoryaraj Enterprise was recorded on 20.03.2014, whereas the
assessment order 143(3) of the Act under was framed in his case after one
year on 13.03.2015, and hence, it can be presumed that the Assessing
Officer has consciously not chosen not to make any addition in respect of
transactions entered into with M/s.Shoryaraj Enterprise . It is not in
dispute that the petitioner in the scrutiny assessment has disclosed the
ledger of M/s.Shoryaraj Enterprise and on an inquiry made by the
Assessing Officer about the sundry debtors, all the details were furnished
by the petitioner. The petitioner in his objection has also mentioned that
the amount of Rs.6,47,201/- was to be recovered from M/s.Shoryaraj
Enterprise at the end of the year as there was a credit balance of
Rs.1,00,000/- of the said party in books of accounts, whereas at the end of
the year under consideration there was debit balance of Rs.6,47,201/-.
Neither the order dated 09.12.2019, nor the affidavit-in-reply deals with
the point raised by the petitioner, except that a bald statement is made in
in the affidavit in reply that the information relating to accommodation
entry was received subsequently from the Investigation Wing. In this
regard, we may mention that the Assessing Officer as well as the
respondent were required to deal with the objection raised by the
Page 9 of 10
Uploaded by K.K. SAIYED(HC00169) on Mon Jul 20 2026 Downloaded on : Mon Jul 20 17:08:34 IST 2026
C/SCA/22214/2019 JUDGMENT DATED: 14/07/2026
petitioner about the information and the statement recorded of
Mr.Satyajitsinh Rajendrasinh Gohil on 20.03.2014 and its impact on the
framing of his assessment order on 13.03.2015. While dealing with such
submission, it was expected that the date or month of receipt of the
information from the Investigation Wing which compelled the revenue to
reopen the assessment ought to have been mentioned. Thus, in our
considered opinion, the reopening of the assessment vide impugned
notice dated 28.03.2019 is required to be quashed and set aside and same
is quashed and set aside. The present writ petition is allowed .
(A. S. SUPEHIA, J)
(VAIBHAVI D. NANAVATI,J)
K.K. SAIYED/19
Page 10 of 10
Uploaded by K.K. SAIYED(HC00169) on Mon Jul 20 2026 Downloaded on : Mon Jul 20 17:08:34 IST 2026