Karnataka High Court quashes assessment notice issued to Embassy Group Chairman Jitendra Virwani under Black Money Act

The Karnataka High Court recently quashed an assessment notice issued to Jitendra Virwani, Chairman of Embassy Group, under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act. [Jitendra Virwani v. Joint Commissioner of Income Tax and Anr].A Division Bench of Justices PS Dinesh Kumar and MG Uma noted that the notice was issued on the premise that Virwani was the owner of Romulus Assets Limited (RAL), despite the Income Tax Appellate Tribunal (ITAT) holding that the Assessing Officer had not discharged the burden to prove that he was."A careful perusal of para 4.4 of the notice clearly indicates that Authority under the BM Act has prejudged and formed an opinion that the petitioner is the beneficial owner of RAL. This contention of the Revenue has not been accepted by the ITAT by holding that the Assessing Officer had not discharged the burden to prove that petitioner is the beneficial owner of RAL," the Court recorded..Pursuant to a search conducted at one of Virwani's residences under Section 132 of Income Tax Act, the Assessing Officer passed assessment orders after making certain additions, by treating Virwani as a beneficial order of RAL.Virwani's challenge to these additions was dismissed by Commissioner of Income Tax (Appeals). He then moved the ITAT, where the additions were set aside holding that the Assessing Officer had not discharged the burden cast on him to prove that Virwani was a beneficial owner of RAL.The Joint Commissioner for Income Tax (JCIT) at Bengaluru subsequently issued the assailed notice on the premise that Virwani owned RAL.Thus, Virwani moved the High Court, where his appeal was dismissed by a single-judge, which led to the present appeal before the Division Bench..Senior Advocate Shashikiran Shetty, appearing for Virwani, contended that the notice under the Black Money Act was without jurisdiction because the proceedings were initiated without any information required under Section 10 of the Act.Further, he told the Court that the ITAT, being the ultimate fact-finding authority under the Act, had held that the Assessing Officer had not proved that Virwani is the beneficial owner of RAL. Hence, he alleged that the officer acted merely on suspicion..Senior Standing Advocate for the Revenue KV Aravind stated that the assailed notice was an exhaustive notice, was issued after receiving information from the JCIT and contained prima facie information based on the search conducted at Virwani's residence..The Court stated that an imputation set aside by a judicial forum - the ITAT in this case - cannot be reopened in parallel proceedings."The authority under the BM Act has alleged several transactions listed therein as illegal transactions. This court cannot examine all allegations/transactions in this proceeding. But the two transactions examined by us clearly show that Income-Tax Department has sent information without proper verification and the Authorities under the BM Act have acted mechanically and sent the impugned notice without application of mind," the Court stated..It was thus held that the notice issued required re-examination. The notice was quashed, with liberty granted to the authority under the Act to issue a fresh notice, in accordance with law..Advocates A Mahesh Chowdhary and Krishika Vaishnav assisted Shetty for Virwani. Advocate M Dilip appeared with Aravind for the tax authorities..[Read Judgment]