ASHOK KUMAR MAKHIJA V. UNION OF INDIA (THROUGH SECRETARY) AND ORS.

W.P.(C)/16680/2022

AI Insights

The case revolves around the reassessment proceedings initiated against Ashok Kumar Makhija for the Assessment Year 2017-18 by the Income Tax Department, which were challenged in the High Court. The proceedings were based on notices issued under Sections 148A(b) and 148 of the Income Tax Act, 1961, following an alleged exponential increase in Makhija's sales turnover during AY 2017-18, which was claimed to have escaped assessment. The primary legal contention was the lack of jurisdiction and the absence of new substantial evidence to justify the reassessment. The court's decision was influenced by the precedent set in Twylight Infrastructure Pvt. Ltd. v. ITO & Ors., which addressed the procedural requirements for issuing such notices.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 725421 (HC-DELHI)
• Appeal Type: Others
• Pronouncement Date: 07-05-2024
• Assessment Year: misc
• Other Referred Cases: Man Mohan Kohli v. ACIT, Union of India v. Ashish Agarwal, Twylight Infrastructure Pvt. Ltd. v. ITO & Ors.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: RANVIR SINGH; ABHISHEK MARATHA; PARTH SEMWAL; NUPUR SHARMA
• Assessee Lawyers: KALRAV MEHROTRA
• Keywords: Cash deposits; Demonetization; Income Tax Return; Jurisdiction; Notice Quashing; Reassessment
• Section: 148; 143(3); 133(6); 151; 148A(b); 148A(d); 131(1A)

Judgement Text

" W.P.(C) 16680/2022 Page 1 of 5 * IN THE HIGH COURT OF DELHI AT NEW DELHI % Judgment reserved on: 08 April 2024 Judgment pronounced on: 07 May 2024 + W.P.(C) 16680/2022 ASHOK KUMAR MAKHIJA ….. Petitioner Through: Mr. Kalrav Mehrotra, Adv. versus UNION OF INDIA (THROUGH SECRETARY) AND ORS. . ……..Respondents Through: Mr. Ranvir Singh, CGSPC for UOI. Mr. Abhishek Maratha, Sr. SC with Mr. Parth Semwal and Ms. Nupur Sharma, Advs. CORAM: HON'BLE MR. JUSTICE YASHWANT VARMA HON’BLE MR. JUSTICE PURUSHAINDRA KUMAR KAURAV J U D G M E N T PURUSHAINDRA KUMAR KAURAV, J. 1. The present petition, filed at the instance of the assessee, seeks quashing of the notices dated 26 May 2022 and 30 July 2022, issued under Section 148A(b) and Section 148, respectively and the consequential order dated 30 July 2022 passed under Section 148A(d) of the Income Tax Act, 1961 [“Act”] for the Assessment Year [“AY”] 2017-18. Digitally Signed By:MAANAS JAJORIA Signing Date:07.05.2024 15:55:24 Signature Not Verified W.P.(C) 16680/2022 Page 2 of 5 2. The petitioner is stated to have been deriving income from the business of wholesale trading of pan masala and beetle nut (supari) through his proprietorship concerns namely, M/s Neelkanth Trades and M/s Prem Supari Bhandar. On 28 March 2017, he was served with a summon under Section 131(1A) of the Act, seeking verification of cash deposits made by him in his bank account during the period of demonetization i.e., 08 November 2016 to 31 December 2016 [“demonetization period”]. 3. Accordingly, on 14 October 2017, the Income Tax Return [“ITR”] was filed by the petitioner for AY 2017-18 declaring a total income of INR 1,70,43,590/-. The said ITR was subjected to scrutiny assessment on the issues of capital gains/loss on sale of property and cash deposits made during the demonetization period. 4. The petitioner claimed that the said cash deposit in his bank account represents the sale proceeds of the business. While issuing notice dated 20 November 2019 under Section 133(6) of the Act, the Revenue sought confirmation from M/s Mahalaxmi Devi Flavours Pvt. Ltd., from whom the petitioner claimed to have made the purchases. Consequently, on 28 December 2019, an assessment order under Section 143(3) of the Act came to be passed accepting the aforesaid ITR. 5. Later, on 08 April 2021, a notice under Section 148 of the Act was issued, reopening the assessment of the petitioner for AY 2017-18 on the ground that the income of the petitioner which was chargeable to tax, had escaped assessment. However, the said notice was quashed following the decision rendered by several High Courts and this Court Digitally Signed By:MAANAS JAJORIA Signing Date:07.05.2024 15:55:24 Signature Not Verified W.P.(C) 16680/2022 Page 3 of 5 in the case of Man Mohan Kohli v. ACIT1, which inter alia declared that all notices issued under Section 148 of the Act after 01 April 2021 under the erstwhile law (un-amended provision of Section 148 of the Act) could not have been issued. 6. In the meantime, the Supreme Court in the case of Union of India v. Ashish Agarwal2 rendered a decision declaring that notices issued under Section 148 of the Act between 01 April 2021 to 30 June 2021, under the old provisions shall be treated as notices under Section 148A(b) of the Act and the same shall be dealt with in the light of the directions contained in the aforesaid decision. 7. As a sequitor, the Revenue issued the impugned notice dated 26 May 2022, under Section 148A(b) of the Act and initiated reassessment proceedings by supplying the petitoner with the information in its possession i.e., an exponential increase in the sales turnover of the petitioner during AY 2017-18, alleging that the same has escaped assessment. Consequently, the impugned order under Section 148A(d) dated 30 July 2022 was passed by the Revenue. 8. Mr. Kalrav Mehrotra, learned counsel for the petitioner argued that the reassessment proceedings for AY 2017-18 lack requisite jurisdiction and are entirely unlawful. He asserted that the initiation of these proceedings stems solely from a change of opinion without providing any new substantial evidence which would warrant such action by the Revenue. 9. He, however, restricted his submission to the extent that as per Section 151 of the Act and considering the fact that the reopening of the case is occurring after a lapse of more than three years, the appropriate 1 2021 SCC OnLine Del 5250 2 2022 SCC OnLine SC 543 Digitally Signed By:MAANAS JAJORIA Signing Date:07.05.2024 15:55:24 Signature Not Verified W.P.(C) 16680/2022 Page 4 of 5 authority for issuance of the notice under Sections 148 and 148A(b) of the Act should have been either the Principal Chief Commissioner or Principal Director General, or in their absence, the Chief Commissioner or Director General, instead of the Principal Commissioner of Income Tax, Delhi-10, who does not fall within the specified authorities outlined in Section 151 of the Act. He relied on the decision of this Court in the case of Twylight Infrastructure Pvt. Ltd. v. ITO & Ors.3, to substantiate his argument that the impugned notice is bad in law. 10. Mr. Abhishek Maratha, learned counsel for the Revenue was unable to controvert the aforesaid submission qua the issue being covered as per the decision of this Court in the case of Twylight Infrastructure (supra). 11. On hearing learned counsels for parties, we find that the challenge raised herein, stands concluded in light of the judgment rendered by this Court in Twylight Infrastructure (supra). 12. Accordingly, for the reasons assigned in the aforenoted judgment, we allow the instant writ petition and quash the impugned notices dated 26 May 2022 and 30 July 2022 and the impugned order dated 30 July 2022, subject to liberty reserved as per paragraph Nos. 28 to 30 of Twylight Infrastructure (supra), which read as under:- “28. Before us, the counsel for the revenue continue to hold this position. The only liberty that they seek is that if, based on the judgment in Ganesh Dass Khanna, the impugned orders and notices are set aside, liberty be given to the revenue to commence reassessment proceedings afresh. 29. Therefore, having regard to the aforesaid, the impugned notices and orders in each of the above-captioned writ petitions are quashed on 3 2024 SCC OnLine Del 330 Digitally Signed By:MAANAS JAJORIA Signing Date:07.05.2024 15:55:24 Signature Not Verified W.P.(C) 16680/2022 Page 5 of 5 the ground that there is no approval of the specified authority, as indicated in Section 151(ii) of the Act. The direction is issued with the caveat that the revenue will have liberty to take steps, if deemed necessary, albeit as per law. 30. Needless to add, the rights and contentions of both the sides will remain open, in the event the revenue triggers reassessment proceedings.” 13. The writ petition is disposed of accordingly alongwith pending application(s), if any. PURUSHAINDRA KUMAR KAURAV, J. YASHWANT VARMA, J. MAY 07, 2024/p Digitally Signed By:MAANAS JAJORIA Signing Date:07.05.2024 15:55:24 Signature Not Verified "