Another company declared the cash it put into my share capital under the Income Declaration Scheme. Does that stop the Department reopening my assessment on the same share money?
No. The Supreme Court set aside the Gujarat High Court's order quashing a section 148 notice and allowed the assessing officer to complete the reassessment. The immunity in section 192 of the Finance Act 2016 runs to the declarant alone and only for limited purposes; a declaration by Garg Logistics could not immunise the assessee, a non-declarant. The reopening was in any case based on material seized in the search on an accommodation entry provider and correlated with the assessee's Registrar of Companies filings, not on the declaration. Where there is objective tangible material, the sufficiency of that material cannot dictate the validity of the notice.
Decided by the Supreme Court (Supreme Court of India — Uday Umesh Lalit J and S. Ravindra Bhat J (author)) on 2022-03-28, reported as Civil appeal arising out of Special Leave to Appeal (C) No. 22921 of 2019 (Supreme Court of India), reportable; impugned judgment dated 14 August 2018 in Special Civil Application No. 21028 of 2017 (Gujarat High Court). It bears on section 147, section 148, section 143(1), section 68 of the Income Tax Act 1961, in Reassessment & Reopening and Cash Credits & Unexplained Money matters.
Two propositions, both used constantly. First, on amnesty and disclosure schemes: immunity is a creature of the statute that grants it, it protects the declarant and only to the extent stated, and it cannot be borrowed by a third party whose income is the same money. The Court applies its earlier line — Sashi Balasubramanian, Tanna & Modi and Tekchand — to hold that immunity granted for one purpose cannot be stretched to another. Second, on reopening: once tangible material exists, the whole assessment for that year is at large and the Revenue examines the return on a clean slate, so the fact that the assessee may have a reasonable explanation is not a ground for quashing the notice at the threshold. The judgment also reaffirms that an intimation under section 143(1) is not an assessment, which makes the case for reopening a non-scrutiny return materially easier for the Department.
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The assessee, a private limited company, filed its return for assessment year 2010-11 on 25 September 2010; it was processed under section 143(1) without scrutiny. A search on Shirish Chandrakant Shah at Mumbai on 9 April 2013 yielded material, including an Excel sheet recovered from a computer back-up, showing date-wise cash receipts and accommodation entries paid through Pradeep Birewar, an Ahmedabad-based entry provider, aggregating Rs 70.01 crore between February 2010 and July 2011. The Department concluded that Shah provided accommodation entries through companies he controlled and that the assessee was a beneficiary, since several companies that had subscribed to its shares at high premium were controlled by him. Separately, in a search on the assessee's group in September 2016, its chairman was questioned about the share application money under section 132(4) and produced Form 2 of a declaration by Garg Logistics Pvt Ltd under the Income Declaration Scheme 2016, said to cover Rs 6.36 crore of undisclosed cash invested in the assessee's share capital. The assessing officer compared that with the assessee's Registrar of Companies filings and found discrepancies, the actual allottees being nine other companies who had invested Rs 6.25 crore. Notice under section 148 was issued on 31 March 2017. The Gujarat High Court quashed it, holding among other things that confidential Income Declaration Scheme information had been used and that the assessee had a reasonable explanation.
The Revenue's appeal was allowed and the High Court's judgment set aside, without order on costs, the assessing officer being at liberty to take steps to complete the reassessment. The High Court had erred in holding that a declaration under the Income Declaration Scheme could lead to immunity from taxation in the hands of a non-declarant. Section 192 of the Finance Act 2016 protects the declarant only, and only from use of the declaration in evidence in penalty proceedings other than under section 185 and in prosecutions under the Income-tax and Wealth-tax Acts. Garg Logistics was the declarant; the fact that it owned up and paid tax and penalty on amounts it claimed to have invested could not enure to the assessee's advantage. The High Court had also gone wrong in finding that confidential Income Declaration Scheme information had been shared: the declaration form was produced by the assessee's own chairman and correlated with Registrar of Companies data, and the recorded reasons disclosed no enquiry into the declarant's account. Finally, the possibility that the assessee has a reasonable explanation is not a ground for quashing a section 147 notice.
The Court worked through the reopening law first. A valid reopening must be preceded by specific, reliable and relevant information; the reasons must be held in good faith and not be a mere pretence, and the court may examine whether they have a rational connection with the belief, but not their sufficiency. Phool Chand Bajrang Lal confirms that facts disclosed in a return which later turn out to be false can themselves found a reopening. Kelvinator requires tangible material with a live link to the belief and treats change of opinion as an in-built check against review in the guise of reassessment. Rajesh Jhaveri establishes that an intimation under section 143(1) is not an order of assessment, so the status of the original proceeding here was, in the Court's word, weak — the return had never been examined. On the facts, the recorded reasons rested on the seized material from the searches on Shah and Birewar correlated with the assessee's own return and Registrar of Companies filings, not on the Garg Logistics declaration, so the assessee's premise was wrong. The Court then added the proposition that once such material exists the entire assessment for that year is at large and the Revenue may look at the return on a clean slate. On immunity, section 192 was read literally: the protection is to the declarant and for a limited purpose. Sashi Balasubramanian held that immunity under an amnesty scheme for offences under tax enactments does not extend to other statutes; Tanna & Modi held that immunity under a voluntary disclosure scheme has its own limitations and cannot be construed so as to frustrate the scheme's object, particularly where a declaration by one entity is used to cover another's income; Tekchand held such immunity is limited and not absolute or universal.
As long as there is objective tangible material (in the form of documents, relevant to the issue) the sufficiency of that material cannot dictate the validity of the notice.
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Handle my notice → Ask a CA on WhatsAppNo. The Supreme Court set aside the Gujarat High Court's order quashing a section 148 notice and allowed the assessing officer to complete the reassessment. The immunity in section 192 of the Finance Act 2016 runs to the declarant alone and only for limited purposes; a declaration by Garg Logistics could not immunise the assessee, a non-declarant. The reopening was in any case based on material seized in the search on an accommodation entry provider and correlated with the assessee's Registrar of Companies filings, not on the declaration. Where there is objective tangible material, the sufficiency of that material cannot dictate the validity of the notice. This was decided by the Supreme Court (Supreme Court of India — Uday Umesh Lalit J and S. Ravindra Bhat J (author)) and bears on section 147, section 148, section 143(1), section 68 of the Income Tax Act 1961. It is reported as Civil appeal arising out of Special Leave to Appeal (C) No. 22921 of 2019 (Supreme Court of India), reportable; impugned judgment dated 14 August 2018 in Special Civil Application No. 21028 of 2017 (Gujarat High Court). Two propositions, both used constantly. First, on amnesty and disclosure schemes: immunity is a creature of the statute that grants it, it protects the declarant and only to the extent stated, and it cannot be borrowed by a third party whose income is the same money. The Court applies its earlier line — Sashi Balasubramanian, Tanna & Modi and Tekchand — to hold that immunity granted for one purpose cannot be stretched to another. Second, on reopening: once tangible material exists, the whole assessment for that year is at large and the Revenue examines the return on a clean slate, so the fact that the assessee may have a reasonable explanation is not a ground for quashing the notice at the threshold. The judgment also reaffirms that an intimation under section 143(1) is not an assessment, which makes the case for reopening a non-scrutiny return materially easier for the Department. If it applies to you, the first step is this: Do not rely on a third party's Income Declaration Scheme declaration to explain your own share capital or credits; the immunity does not travel to you.
The assessee, a private limited company, filed its return for assessment year 2010-11 on 25 September 2010; it was processed under section 143(1) without scrutiny. A search on Shirish Chandrakant Shah at Mumbai on 9 April 2013 yielded material, including an Excel sheet recovered from a computer back-up, showing date-wise cash receipts and accommodation entries paid through Pradeep Birewar, an Ahmedabad-based entry provider, aggregating Rs 70.01 crore between February 2010 and July 2011. The Department concluded that Shah provided accommodation entries through companies he controlled and that the assessee was a beneficiary, since several companies that had subscribed to its shares at high premium were controlled by him. Separately, in a search on the assessee's group in September 2016, its chairman was questioned about the share application money under section 132(4) and produced Form 2 of a declaration by Garg Logistics Pvt Ltd under the Income Declaration Scheme 2016, said to cover Rs 6.36 crore of undisclosed cash invested in the assessee's share capital. The assessing officer compared that with the assessee's Registrar of Companies filings and found discrepancies, the actual allottees being nine other companies who had invested Rs 6.25 crore. Notice under section 148 was issued on 31 March 2017. The Gujarat High Court quashed it, holding among other things that confidential Income Declaration Scheme information had been used and that the assessee had a reasonable explanation. The matter was decided on 2022-03-28 by the Supreme Court (Supreme Court of India — Uday Umesh Lalit J and S. Ravindra Bhat J (author)). On those facts the Supreme Court held as follows. The Revenue's appeal was allowed and the High Court's judgment set aside, without order on costs, the assessing officer being at liberty to take steps to complete the reassessment. The High Court had erred in holding that a declaration under the Income Declaration Scheme could lead to immunity from taxation in the hands of a non-declarant. Section 192 of the Finance Act 2016 protects the declarant only, and only from use of the declaration in evidence in penalty proceedings other than under section 185 and in prosecutions under the Income-tax and Wealth-tax Acts. Garg Logistics was the declarant; the fact that it owned up and paid tax and penalty on amounts it claimed to have invested could not enure to the assessee's advantage. The High Court had also gone wrong in finding that confidential Income Declaration Scheme information had been shared: the declaration form was produced by the assessee's own chairman and correlated with Registrar of Companies data, and the recorded reasons disclosed no enquiry into the declarant's account. Finally, the possibility that the assessee has a reasonable explanation is not a ground for quashing a section 147 notice.
The Court worked through the reopening law first. A valid reopening must be preceded by specific, reliable and relevant information; the reasons must be held in good faith and not be a mere pretence, and the court may examine whether they have a rational connection with the belief, but not their sufficiency. Phool Chand Bajrang Lal confirms that facts disclosed in a return which later turn out to be false can themselves found a reopening. Kelvinator requires tangible material with a live link to the belief and treats change of opinion as an in-built check against review in the guise of reassessment. Rajesh Jhaveri establishes that an intimation under section 143(1) is not an order of assessment, so the status of the original proceeding here was, in the Court's word, weak — the return had never been examined. On the facts, the recorded reasons rested on the seized material from the searches on Shah and Birewar correlated with the assessee's own return and Registrar of Companies filings, not on the Garg Logistics declaration, so the assessee's premise was wrong. The Court then added the proposition that once such material exists the entire assessment for that year is at large and the Revenue may look at the return on a clean slate. On immunity, section 192 was read literally: the protection is to the declarant and for a limited purpose. Sashi Balasubramanian held that immunity under an amnesty scheme for offences under tax enactments does not extend to other statutes; Tanna & Modi held that immunity under a voluntary disclosure scheme has its own limitations and cannot be construed so as to frustrate the scheme's object, particularly where a declaration by one entity is used to cover another's income; Tekchand held such immunity is limited and not absolute or universal. In the words reproduced by the source cited on this page: "As long as there is objective tangible material (in the form of documents, relevant to the issue) the sufficiency of that material cannot dictate the validity of the notice."
It was decided by the Supreme Court on 2022-03-28 and is reported as Civil appeal arising out of Special Leave to Appeal (C) No. 22921 of 2019 (Supreme Court of India), reportable; impugned judgment dated 14 August 2018 in Special Civil Application No. 21028 of 2017 (Gujarat High Court). Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section 147, section 148, section 143(1), section 68, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the department, and it appears in this library for that reason — you need to know what the Assessing Officer will cite against you. The Revenue's appeal was allowed and the High Court's judgment set aside, without order on costs, the assessing officer being at liberty to take steps to complete the reassessment. The High Court had erred in holding that a declaration under the Income Declaration Scheme could lead to immunity from taxation in the hands of a non-declarant. Section 192 of the Finance Act 2016 protects the declarant only, and only from use of the declaration in evidence in penalty proceedings other than under section 185 and in prosecutions under the Income-tax and Wealth-tax Acts. Garg Logistics was the declarant; the fact that it owned up and paid tax and penalty on amounts it claimed to have invested could not enure to the assessee's advantage. The High Court had also gone wrong in finding that confidential Income Declaration Scheme information had been shared: the declaration form was produced by the assessee's own chairman and correlated with Registrar of Companies data, and the recorded reasons disclosed no enquiry into the declarant's account. Finally, the possibility that the assessee has a reasonable explanation is not a ground for quashing a section 147 notice. It arises in Reassessment & Reopening and Cash Credits & Unexplained Money matters, on section 147, section 148, section 143(1), section 68 of the Income Tax Act 1961, and was decided by Supreme Court of India — Uday Umesh Lalit J and S. Ravindra Bhat J (author). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Fight the reopening on whether tangible material exists and has a live link with the belief, not on the sufficiency of that material or on the strength of your explanation. Where the original return was only processed under section 143(1), expect a lower threshold for reopening and prepare to meet the section 68 case on identity, creditworthiness and genuineness on the merits. Read the recorded reasons closely to identify what the belief actually rests on; the Court here found the High Court had misread the basis of the reopening.
Still good law. A reportable judgment of March 2022; the source page records it cited in four later matters. No later decision was available here to check it against. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The source page prints no reporter citation and the civil appeal number is left blank in the judgment as uploaded, so the special leave petition number is given instead. The judgment decides only the validity of the reopening notice; nothing was decided about whether the share capital is in fact unexplained under section 68, which was left to the reassessment. The reasons recorded refer at points to assessment year 2011-12 while the notice under challenge relates to assessment year 2010-11; the judgment reproduces both without reconciling them. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The Revenue's appeal was allowed and the High Court's judgment set aside, without order on costs, the assessing officer being at liberty to take steps to complete the reassessment. The High Court had erred in holding that a declaration under the Income Declaration Scheme could lead to immunity from taxation in the hands of a non-declarant. Section 192 of the Finance Act 2016 protects the declarant only, and only from use of the declaration in evidence in penalty proceedings other than under section 185 and in prosecutions under the Income-tax and Wealth-tax Acts. Garg Logistics was the declarant; the fact that it owned up and paid tax and penalty on amounts it claimed to have invested could not enure to the assessee's advantage. The High Court had also gone wrong in finding that confidential Income Declaration Scheme information had been shared: the declaration form was produced by the assessee's own chairman and correlated with Registrar of Companies data, and the recorded reasons disclosed no enquiry into the declarant's account. Finally, the possibility that the assessee has a reasonable explanation is not a ground for quashing a section 147 notice.
TaxSphere, “Dy. CIT v M.R. Shah Logistics Pvt Ltd”, https://taxnotice.vittsphere.com/caselaw/case/dy-cit-v-m-r-shah-logistics-p-ltd/ (validity last checked 2026-08-29)
The judgment itself is a government work and may be quoted freely. The summary, the validity note and the reasoning on this page are this library's own writing: quote them with attribution, and please do not present either as the words of the court — this page keeps the two apart and so should a quotation of it.
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The reasons recorded just repeat what the Investigation Wing said. Is that enough to reopen?
The Assessing Officer has reopened my assessment purely on an investigation wing list saying my share application money was an accommodation entry. Can I get the notice quashed?
I made unexplained investments after the close of my accounting year. Which year can the officer tax them in, and can he reopen an earlier year to do it?
I have produced the share subscribers' incorporation certificates, PAN cards, bank statements and confirmations — is that enough to discharge my onus under section 68?
