While deciding on the issue of the addition of peak balances in respect of loans from directors, the Bombay High Court found that the Department had considered the opening balance while calculating the peak balance, by relying upon three judicial decisions that are completely non-existent. Essentially, there are no such decisions at all that are sought to be relied upon by the Department.
The Division Bench comprising Justice B.P. Colabawalla and Justice Amit S. Jamsandekar observed that in the era of Artificial Intelligence (AI), one tends to place much reliance on the results thrown open by the system. However, when one is exercising quasi-judicial functions, it goes without saying that such results [which are thrown open by AI] are not to be blindly relied upon, but the same should be duly cross-verified before using them.
The Bench cautioned that mistakes like the present one of citing non-existing cases have crept in this case, due to carelessness, and justified the grievances of the petitioner for their cluelessness as to how the figures are arrived at, as no basis or working was ever shown, nor was any Show Cause Notice issued before making the addition of peak balance.
Accordingly, the Bench quashed the assessment order passed under Section 143(3) read with Section 144B, the demand notice, as well as the consequential SCN for levy of penalty issued under Section 274 read with Section 271AAC of the Income Tax Act. The Bench also remanded the matter back to the file of the AO to grant a reasonable opportunity of hearing to the petitioner.
Briefly, in this case, the petitioner had challenged the assessment orders passed under Section 143(3) read with Section 144B, assessing the total income at Rs. 27.91 crores in place of Rs. 3.09 crores returned by the petitioner, by making additions on account of the unsecured loans from directors, wherein the peak balance of Rs. 22.66 crores was added.
Appearances:
Advocates Dharan V. Gandhi and Aanchal Vyas, for the Petitioner/ Taxpayer
Advocate Akhileshwar Sharma, for the Respondent/ Revenue