Karnataka HC Set Aside Assessment Notice Issued to Embassy Group Chairman Virwani Under Provisions of Black Money Act

Savvy ThakurPublished on: 30 November 2022 at 18:00 IST

An assessment notice issued to Embassy Group Chairman Jitendra Virwani under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act was recently overturned by the Karnataka High Court.

A Division Bench of Justices PS Dinesh Kumar and MG Uma noted that the notice was issued based on the assumption that Virwani was the owner of Romulus Assets Limited (RAL), despite the Income Tax Appellate Tribunal (ITAT) ruling that the Assessing Officer had failed to meet the burden of proof.

“A careful reading of paragraph 4.4 of the notice makes it abundantly clear that the Authority in accordance with the BM Act has determined that the petitioner is the beneficial owner of RAL.”

“The Assessing Officer had not discharged the burden to prove that petitioner is the beneficial owner of RAL,” the Court further noted, “but this contention of the Revenue has not been accepted by the ITAT.”

The Assessing Officer treated Virwani as a beneficial order of RAL during the course of a search that was carried out at one of Virwani’s residences in accordance with Section 132 of the Income Tax Act. Following the addition of a few additional items, the Assessing Officer issued assessment orders.

The Commissioner of Income Tax (Appeals) denied Virwani’s challenge to these additions.After that, he moved the ITAT, and the additions were overturned on the grounds that the Assessing Officer had failed to meet his obligation to demonstrate that Virwani was a beneficial owner of RAL.

The assailed notice was then issued by the Joint Commissioner for Income Tax (JCIT) in Bengaluru based on the assumption that Virwani owned RAL.

Consequently, Virwani filed an appeal with the Division Bench after moving to the High Court, where his appeal was denied by a single judge.

Virwani’s counsel, Senior Advocate Shashikiran Shetty, argued that the Black Money Act’s notice was invalid because the proceedings were started without the information required by Section 10 of the Act.

In addition, he informed the Court that the Assessing Officer had failed to demonstrate that Virwani is the beneficial owner of RAL, as the ITAT was the Act’s ultimate fact-finding authority.As a result, he claimed that the officer only acted on suspicion.

KV Aravind, Senior Standing Advocate for the Revenue, stated that the challenged notice was comprehensive, was issued following information from the JCIT, and contained prima facie information based on the residence search.

The Court stated that parallel proceedings cannot reopen an imputation that has been set aside by a judicial forum, in this case the ITAT.

“Several of the transactions listed in the BM Act have been alleged to be illegal by the authority. In this proceeding, this court is unable to investigate all allegations or transactions.”

However, “the Authority under the BM Act has acted mechanically and sent the impugned notice without application of mind,” the Court stated that, “but the two transactions examined by us clearly show that Income-Tax Department has sent information without proper verification.”

So, it was decided that the notice that was given needed to be looked at again. The notice was overturned, and the Act’s authority to issue a new notice in accordance with the law was given permission to do so.

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